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Americans are missing their car payments at a staggering rate
Longer loan terms have kept purchases within reach—but that "quick fix" has real trade-offs. (2 min. read)
Anna del Villar
April 09, 2025
Car ownership costs, from loans to insurance, are climbing faster than incomes, testing consumers in an economy that has been showing signs of strain.
Driving the news: Longer auto loan terms have kept purchases within reach so far, but rising delinquencies in the auto asset-backed securities market suggest that this approach may be hitting its limit.
By the numbers:
6.6% of subprime auto borrowers were 60+ days past due in January 2025, the highest in Fitch Ratings' records.
In February, subprime delinquencies were slightly lower, but the 2025 average holds above 6%, up 45 bps from 2024.
0.39% of prime borrowers posted 60-day delinquencies in January 2025, up from 0.35% a year earlier.
Interest rates on 84-month loans are up 76 basis points, 72-month loans also rose 49 bps, and 60-month loans increased as well by 22 bps.
Why it matters: Several factors are pushing car ownership expenses higher, including elevated new vehicle prices ($48,000+), inflated insurance premiums, and rising repair costs. So auto lenders—and dealers—lean on longer terms not just to make monthly payments affordable, but to lower the debt-to-income (DTI) ratio, which is critical for loan approvals.
Yes, but that approach introduces long-term risks across the system, like:
Ballooning negative equity as car values drop.
A slowdown in trade-ins, as more buyers are tied to 6-7 year loans.
The possibility of loans falling further into delinquency or even default territory—resulting in more lender charge-offs.
Bottom line: With tariff pressures bearing down and subprime delinquencies exceeding 5.5% for over 2 years—it appears the auto lending market is settling into a new, "ugly" normal.
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