Auto lenders increasingly turn to payment extensions

More Americans are struggling to keep up with their car payments, and auto lenders are increasing payment extensions to borrowers to keep those loans from going bad.

For context: A new S&P Global Mobility analysis of auto asset-backed securities (bundles of auto loans that get sold to an issuer, who then turns them into tradable shares) shows just how deep the problem runs.

• 60+ day auto loan delinquencies in the subprime cohort (less credit-worthy borrowers) hit 6.56% in December 2024—the highest ever recorded. That’s up from 6.01% in November 2024 and 6.27% in 2023.

• Delinquencies for prime (more credit-worthy borrowers) rose as well, but barely—hitting 0.62%, up from 0.58% in November 2024, and down 0.02% against 2023.

As a result—lenders are using payment extensions to mitigate loans from falling further into delinquency (or more costly repossessions).

• Subprime borrowers took extensions at nearly five times the rate of prime borrowers—3.81% vs. 0.77%.

• But some subprime lenders saw even bigger jumps. DriveTime’s extension rate shot up from 4.71% to 6.41%—while Carvana’s subprime loans jumped from 3.72% to 5.41%. Westlake’s subprime extension rate also climbed past 9.5%.

Why it matters: Extensions provide temporary breathing room, but they can come at a steep cost. For example, a six-month extension on a $25,000 loan at 15% APR—not an uncommon scenario in subprime—tacks on over $3,100 in extra interest and extends the debt well beyond its original term. That’s why financial analysts often call the approach “extend and pretend”—kicking the can down the road without solving the underlying problem.

Between the lines: Some lenders know the risks but seem willing to take them. Ally and CarMax admitted in recent earnings calls that they’re loosening extension policies, making it easier for borrowers to delay payments.

• Ally CFO Russ Hutchinson said the company is moving back the timing of repossessions and removing some of the friction around extensions.

• CarMax CFO Enrique Mayor-Mora stated that the company "began testing an enhancement to our policy that further empowers delinquent customers to take advantage of a payment extension."

• But the New York Fed warns that too many extensions "creates a wave of debt that likely won't be paid" and puts further pressure on lenders.

What we're watching: While the $126 billion in securitized auto loans accounted for just roughly 18% of the $704 billion in total U.S. auto loan originations last year—some analysts believe it's a bubble beginning to grow. 

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