Jennifer Moore
Have you ever financed a purchase thinking, “I’ve got this,” only to struggle with payments later on? If so, you're not alone. Many people are finding it harder to keep up with car loans, especially as everyday expenses continue to rise.
Auto loan delinquency happens when a borrower misses a payment by more than 30 days. And right now, those missed payments are hitting record highs—especially among subprime borrowers. As of early 2025, over 6.6% of subprime auto loans are more than 60 days late, the highest rate in years.
What’s causing this jump? A mix of higher car prices, rising interest rates, and tighter household budgets is all playing a part.
In this article, we’ll explain what’s behind the rise in auto delinquencies, who’s most affected, what it means for the economy, and how you can stay ahead of your car loan.
Contributing Factors to Rising Delinquencies
Though most borrowers do everything they can to avoid defaulting on their car loan, sometimes things simply get out of their control. Their budget requirements may have changed due to a change in income or housing needs. They may have faced an emergency expense that left them without extra funding. These situations can be especially frustrating,
However, there are other reasons that auto loan delinquencies are on the rise.
Economic Pressures
Persistent inflation and rising living costs have strained household budgets. Consumers are prioritizing essential expenses, leading to missed loan payments. The resumption of student loan repayments has further tightened finances, contributing to higher delinquency rates across various loan types.
Vehicle Costs
The average price of new cars has increased significantly, with the average cost of a new car sitting around $50,000. Combine that with high financing costs and longer loan terms, and it simply increases the risk of borrowers owing more than their vehicles are worth.
Credit Dynamics
Though the average credit score in the U.S., is currently around 715, some borrowers are not quite so fortunate. Subprime borrowers—those with lower credit scores—are experiencing the highest delinquency rates. As we mentioned earlier, as of early 2025, over 6.6% of subprime auto loans are two months overdue or more, the highest rate in years.
Demographics and Regions
Younger borrowers and those in lower-income brackets continue to be hit hardest by rising auto loan delinquencies. These groups often have less financial cushion to fall back on when budgets tighten. Regionally, areas with higher living costs—such as the West Coast and parts of the South—have seen larger jumps in late payments.
Delaware has one of the highest auto loan delinquency rates in the country, with about 21.1% of borrowers behind on payments. In contrast, some states have seen much smaller increases. Some of the lowest jumps in auto delinquency were recorded in Wyoming (2.15%), New Jersey (2.06%), and Arkansas (2.02%). These differences suggest that location, cost of living, and economic stability all play a big role in how borrowers are affected.
Implications for Consumers and the Economy
Rising auto loan delinquencies can have serious consequences for both individuals and the broader economy. When borrowers fall behind on payments, vehicle repossessions become more likely. Losing a car can disrupt daily life, especially for those who rely on it for work or family responsibilities.
Missed payments also lead to lower credit scores, which can make it harder to qualify for future loans or result in higher interest rates. A drop in credit standing can take months—or even years—to rebuild.
On a larger scale, increased delinquencies may cause lenders to tighten their approval standards. This can make it more difficult for borrowers—especially those with lower credit scores—to secure financing. Financial regulators may also respond by proposing new rules to address risky lending behavior.
If you're worried about making payments or facing a similar situation, here are some helpful strategies:
- Talk to your lender early if you think you’ll miss a payment—many offer hardship programs.
- Refinance your auto loan with a company like RateWorks to potentially lower your monthly cost.
- Create a budget and track spending to stay on top of bills.
- Avoid borrowing more than you need, especially if your income or job situation feels uncertain.
Preventing Auto Delinquency
Auto delinquency is on the rise, with more drivers struggling to keep up with their loan payments due to higher vehicle costs, tighter budgets, and changing credit conditions. Subprime borrowers and younger consumers are especially feeling the pressure, and missed payments can quickly lead to repossession and long-term credit damage.
We’ve covered the main reasons why auto delinquency rates are climbing, what this trend means for borrowers and the economy, and how lenders may react. The good news is that there are steps you can take to protect your finances.
If your current auto loan feels like too much to handle, refinancing with RateWorks could be a smart move. You may be able to lower your monthly payment and avoid falling behind.
Take control of your loan before it becomes a problem—get a quote from RateWorks today and see how refinancing could help you save.
