Prime borrowers stumble as auto loan delinquencies rise

Auto loan delinquencies are ticking up, but there's a curveball. Prime borrowers — those with solid credit — are missing payments at higher rates than before the pandemic. Meanwhile, subprime delinquencies are cooling off, inching back toward pre-COVID levels.

Driving the news: Inflation, high interest rates, and rising costs are squeezing consumers. Even borrowers with good credit are struggling to keep up.

By the numbers: Early- and late-stage delinquencies increased across securitized prime and subprime auto loans on a year-over-year basis in Sept., according to KBRA’s auto loan ABS index report.

• Prime borrowers:

  • 30-59 day delinquencies: 1.21% (up 8 bps YoY, down 7 bps MoM).

  • 60+ day delinquencies: 0.56% (up 5 bps YoY, flat MoM).

• Subprime borrowers:

  • 30-59 day delinquencies: Up 32 bps YoY, but fell 53 bps MoM.

  • 60+ day delinquencies: 5.92% (up 19 bps YoY, down 12 bps MoM).

Why it matters: Prime borrowers slipping on payments is a red flag — households with good credit are now facing the kind of financial stress typically reserved for riskier borrowers.

• UBS analysts note that borrowers are still scrambling to avoid default, making just enough payments to dodge repossession. But cracks are forming in what was once thought to be a stable segment.

Big picture: Auto loans only make up 4% of total bank lending, but for many households, they’re a significant burden. With auto debt now 9% of household credit — outpacing student loans — even a slight rise in delinquencies can shake consumer finances.

What’s next: Investors remain cautiously optimistic, but automakers are stepping in with aggressive offers, and looser credit today could spell trouble tomorrow if borrowers can’t stay afloat. We're keeping an eye on the month ahead. Prime delinquencies will tell us if financial pressures are here to stay—or if consumers can regain control before things spiral further.

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