Auto loan defaults have surged to their highest level since 2009, signaling a growing strain on many Americans’ ability to keep up with car payments. This trend is catching the attention of lenders, consumers, and economists alike because it reflects broader financial pressures that are impacting everyday life.
To put it in perspective, about **5% of all outstanding auto loans were at least 90 days late** in early 2025. This delinquency rate has climbed by over 13% compared to the previous year. It’s a significant jump from recent years and echoes some of the challenges seen during the aftermath of the Great Recession[1]. While this isn’t quite as high as the peak delinquency rate recorded in late 2010 (which was around 5.3%), it’s still an alarming indicator that more borrowers are struggling to meet their monthly obligations.
One factor contributing to this rise is that **the average monthly car payment for new vehicles has increased**, reaching roughly $745 per month in early 2025—a slight uptick from previous years[1]. At the same time, many people are taking longer terms on their loans; average loan durations now hover around nearly six years for new cars. Longer terms can lower monthly payments but often mean paying more interest over time and potentially being underwater on a loan if vehicle values drop faster than balances decline.
Interestingly, most auto financing still goes to borrowers with good credit scores—those considered prime or super-prime make up nearly 70% of retail vehicle financing[1]. Yet even among these relatively low-risk borrowers, delinquencies have been rising. This suggests that economic factors beyond creditworthiness—such as inflationary pressures on household budgets or unexpected expenses—are making it harder for people across credit tiers to stay current.
The types of vehicles people are buying also play a role. Popular models like pickup trucks and SUVs tend to be pricier both upfront and when financed over long periods[1]. With higher prices combined with rising interest rates earlier in recent years (though rates have somewhat stabilized since mid-2024), monthly costs can become burdensome quickly if incomes don’t keep pace.
What does this mean practically? For one thing, lenders may tighten underwriting standards or raise interest rates further for riskier borrowers going forward. Consumers might find themselves needing larger down payments or shorter loan terms if they want approval at reasonable rates. And those who do fall behind face consequences like damaged credit scores or repossession risks—which only complicate future borrowing needs.
This spike in auto loan defaults highlights how intertwined personal finances are with broader economic conditions right now: wage growth hasn’t fully kept up with inflation; living costs remain elevated; and debt loads continue climbing across multiple categories—not just autos but also personal loans and credit cards[2][3].
In short, while owning a car remains essential for millions—whether commuting to work or managing family logistics—the cost burden is becoming heavier for many households than it has been in over a decade. Watching how these trends evolve will be crucial because they offer an early glimpse into potential stress points within consumer finance that could ripple through other parts of the economy soon enough.