Auto loans represent a cornerstone of household independence, giving millions of Americans access to employment, family responsibilities, and everyday necessities. Yet the financial pressure surrounding vehicle ownership has intensified considerably. The serious delinquency rate for auto loans, defined as balances 90 or more days past due, reached 5.6% in the first quarter of 2026, according to the Federal Reserve Bank of New York Household Debt and Credit Report. This marked a new series record, exceeding the 5.3% Great Recession peak recorded in the fourth quarter of 2010. 

The pressure is being driven by several connected forces, including larger vehicle payments, elevated interest rates, expensive insurance, longer loan terms, and older loans originated during the early pandemic period. At the same time, lenders are seeing stress spread beyond traditional high-risk borrowers, requiring more detailed portfolio analysis and forward-looking risk management. Borrowers, meanwhile, can take proactive steps such as contacting lenders, reviewing budgets, exploring refinancing, and seeking credit counselling before payment problems become more severe.

1. Auto Loan Delinquency Has Reached A New Record 

Serious delinquency on auto loans has jumped to a record in the current data series. The Federal Reserve Bank of New York Household Debt and Credit Report reports that for the first quarter of 2026, 5.6 percent of auto loans were seriously delinquent, defined as being either 90 or more days past due or in the process of foreclosure. 

That compares to 5.3 percent in the final quarter of 2010, the peak of the Great Recession. In recent quarters, the increase has been persistent, if not precipitous: The seriously delinquent auto loan rate has climbed for 11 consecutive quarters, peaking at 3.9 percent in the second quarter of 2022 (immediately following the outbreak of the COVID-19 pandemic) before jumping once again. The auto loan delinquency rate was 4.9 percent as of the fourth quarter of 2019, before the pandemic, and 2.9 percent for credit cards as of the first quarter of 2026. 

Record Delinquency Signals: 

• Serious delinquency reached 5.6%
• Great Recession peak reached 5.3%
• Rates rose eleven straight quarters
• Post-COVID trough reached 3.9%
• Credit cards remained considerably lower

Meanwhile, the scale of the challenge is even greater when measured in dollars. Debt outstanding on auto loans has surged to approximately $800 billion in 2010 to approximately $1.66 trillion, up from roughly one-half of that amount at the start of the decade. The implication is that the cost of the current delinquency rate is substantially higher than it was at the peak of the Great Recession. Delinquent auto loan balances outstanding were over $94 billion in 2026, illustrating the potential exposure for families, lenders and the economy as a whole. 

2. Vehicle Payments Are Consuming More Household Income 

The challenge of delinquencies is intimately tied to the challenge of payments. Auto loans are becoming harder to service for many reasons, not the least of which is that vehicles are costing more. According to Federal Reserve economists, monthly payments on new vehicles jumped nearly 30 percent between 2020 and 2023, rising from around $470 to around $600. Older vehicles, of course, still represent a significant portion of the market. 

New vehicles, for their part, have become dramatically more expensive over that same span, averaging $49,766 in October, only slightly below the September record high. By the fourth quarter of 2025, the average new-car payment had reached $767 per month, according to Cox Automotive. Taken together, the combination of higher payments and higher prices is clearly weighing on household finances. 

Growing Vehicle Costs Include:

• Monthly payments increased nearly thirty-percent
• New vehicle prices remain elevated
• Average payment reached $767 monthly
• Interest rates increased borrowing costs
• Household budgets face greater pressure

Meanwhile, interest rates for auto loans have risen as well (for many borrowers), adding to the burden. A borrower who could have secured a 5 percent interest rate before the jump in rates might now be looking at 8 percent, or higher particularly if the borrower has less than an excellent credit score. That increase alone could add $50 or more to every monthly instalment and compound across the entire loan. Insurance, maintenance, and fuel costs further reduce available household funds. Bankrate reported that average annual auto insurance premiums reached $2,638 in 2025 (more than 12 percent higher than in 2024). 

3. Pandemic-Era Loans Are Now Creating Greater Pressure 

Auto-loan delinquencies are being driven in part by loans originated in the early days of the pandemic. Michael Brisson, an automotive economist at Moody’s Analytics, noted that many of the loans that had gone delinquent in recent quarters were originated when “the world was turned completely upside down.” 

Notably, auto-loan delinquencies were down sharply during the pandemic as many families focused on paying down revolving credit-card debt, saving where they could and spending less overall on vehicles. As a result, many borrowers who might otherwise have defaulted on their loans ended up with excellent or even exceptional credit scores. At the same time, auto lenders were loosening their standards, taking advantage of the improved scoring environment. As a result, borrowers who might have defaulted on their loans earlier ended up with larger loans that were more expensive. 

Pandemic Lending Effects:

• Borrowing conditions were temporarily looser
• Household balances received temporary support
• Credit scores appeared temporarily stronger
• Larger loans remained on books
• Older balances now face pressure

Mr. Brisson added that the loans were “front and centre” in the current delinquency environment as borrowers moved further into their repayment schedules and those early benefits disappeared. Moreover, many of these borrowers took out larger loans or borrowed against inflated vehicle prices, leaving them with substantially more debt than they otherwise would have carried. Jeremy Robb, an executive at Cox Automotive, noted that 2025 was a particularly challenging year for many families, as they balanced automotive-loan payments, insurance, gas and groceries without the same level of financial support as before the pandemic. 

4. Longer Loan Terms Are Increasing Borrower Risk 

Longer auto loan terms have become a major affordability tool across the industry. Extending the repayment period allows borrowers to reduce their initial monthly payment even when vehicle prices are high. However, the strategy also creates a longer period during which borrowers remain financially exposed. Dealertrack data from October showed that 84-month loans accounted for 22% of new originations, a record high, while loans lasting 72 months or longer represented 27.5% of total originations. 

Average loan terms have also continued to increase. New-vehicle loans averaged 68.9 months, while used-vehicle loans averaged 67.7 months. Milliman’s October 2025 analysis found that the average maturity of a used-vehicle loan increased by four months between 2019 and 2024. 

Extended Terms Create Pressure: 

• Eighty-four-month loans reached records 
• Longer terms reduce initial payments 
• Average terms continue increasing 
• Used loans gained four months 
• Extended repayment increases exposure

The issue with longer maturities is that they decrease the amount of equity in the vehicle over the life of the loan particularly in the early years since the borrower continues to pay interest on the amount financed. As a result, if a borrower needs to turn the vehicle back to the lender in the first 24-26 months of the loan (through repossession, voluntary surrender or another form of liquidation), the lender likely will realize far less value than it would have if the borrower continued to make payments. Meanwhile, longer maturities mean a bigger bite on the borrower’s budget if he or she loses a job or suffers another setback. According to Milliman’s analysis, total delinquent balances on auto loans exceeded $60 billion in 2025.

5. Delinquency Is Spreading Beyond Subprime Borrowers 

Auto-loan delinquencies are no longer confined to the subprime borrowers with the lowest credit scores. According to the Federal Reserve, as of September 30, 2025, 15.78 percent of subprime auto loans (those with credit scores below 620) were either 30 or more days delinquent, the highest since the series began in 2000, according to the data vendor. 

But borrowers with fair and good credit scores also were suffering: VantageScore’s Credit Gauge analysis as of November 2025 shows that 1.13 percent of auto loans were 30-59 days delinquent as of September 2025, the highest since the same period five years ago. At the same time, the share of auto loans outstanding with prime borrowers dropped from 34.0 percent in September 2023 to 32.7 percent in September 2025, with similar increases seen among near prime borrowers. 

Credit Stress Is Broadening:

• Subprime delinquency reached records 
• Prime borrowers face increasing pressure 
• Near prime borrowers are expanding 
• Early delinquencies reached five-year highs 
• Credit quality mix continues shifting

Prime borrowers also can find themselves in far more perilous financial positions than many realize, particularly if they financed a more expensive vehicle with a longer loan. Families that took out $50,000 loans on 72- or 84-month contracts in 2021, 2022 and 2023, for example, would have 30-40 months remaining on those loans in 2025 with no positive equity in the vehicles. Higher interest rates, insurance costs and repair and maintenance expenses have further strained budgets in recent years. Auto loans, according to analysis from the New York Fed’s Liberty Street Economics, represent the most stressed category for non-captive finance companies (auto lenders that are not affiliated with a car manufacturer). 

6. Lenders Are Tightening Their Auto Financing Strategies 

As delinquency rates increase, lenders and other market participants are adjusting their credit strategies. Federal Reserve Bank of New York data showed that auto lenders and finance companies denied 15.2% of loan applications in October, compared with 6.7% in June. The increase represents a substantial change in lending outcomes as financial institutions respond to rising payment stress and changing borrower conditions. 

The lending environment is also being influenced by borrowing rates across different credit categories. Experian reported that borrowing rates across every credit tier except super prime, defined in the supplied material as scores of 780 or below, had fallen across each of the previous four years through mid-2025. Despite those changes, the overall market continues to face pressure from large balances, extended terms, and borrowers carrying expensive vehicles. 

Lenders Are Responding Cautiously:

• Application denials increased sharply 
• October denials reached 15.2% 
• June denials were only 6.7% 
• Credit tiers show changing rates 
• Portfolio stress influences lending

The shift highlights the importance of understanding more than a borrower’s individual credit score. Traditional credit evaluation can overlook the effects of loan term, vehicle depreciation, payment behaviour, and the wider household financial environment. As market conditions evolve, lenders need to identify where risks are concentrated and understand how different borrower and loan characteristics interact. This becomes particularly important for extended-term portfolios, where negative equity and longer exposure can make future performance more difficult to predict.

7. Borrowers Can Take Action Before Payments Become Serious 

Vehicle owners who are finding it difficult to make their payments should take action early and often to keep their cars and their credit scores from being seriously damaged. One of the most crucial actions is to contact the auto lender directly, as many have hardship programs or other options open to delinquent borrowers.  

At the same time, borrowers should ensure they have updated their budgets to reflect their financial realities, including any changes stemming from the pandemic and its lingering effects. Another option is to contact a nonprofit credit-counselling agency to discuss ways of reducing expenses and maintaining their access to transportation while still adhering to their personal budgets. If their credit scores are low or non-existent those agencies also can help the borrowers develop a plan for repairing their finances. By contrast, borrowers with good credit scores and/or a co-signer may want to explore refinancing their auto loans as a way of reducing their monthly payments. 

Early Borrower Actions Matter:

• Application denials increased sharply 
• October denials reached 15.2% 
• June denials were only 6.7% 
• Credit tiers show changing rates 
• Portfolio stress influences lending

The supplied guidance goes into far greater depth about these actions and many others that vehicle owners can take to address their financial concerns. It also points out that auto lenders may be willing to work out a compromise for borrowers who are struggling but not insolvent. Above all, they should not wait until their loans are seriously delinquent: At that point, their options are much more limited and may not include traditional remedies like credit counselling or budget management.

8. Refinancing, Selling, Or Surrendering Can Offer Alternatives 

Borrowers facing financial pressure have several potential options depending on their credit position and vehicle equity. Those with good credit or creditworthy co-borrowers can evaluate refinancing as a way to seek lower monthly payments on shorter terms. Borrowers who are upside down on their loans, meaning they owe more than the vehicle is worth, may need guidance from credit counsellors or dealers before making a decision. 

For borrowers with positive equity, evaluating resale or trade-in value can create another pathway. Kelley Blue Book can be used to explore the vehicle’s resale or trade-in value and potentially help a household transition into lower-cost transportation. The appropriate option depends on the borrower’s financial position and the amount of equity attached to the vehicle. 

Possible Paths For Borrowers:

• Refinancing may lower monthly payments 
• Creditworthy co-borrowers may help 
• Positive equity enables vehicle transitions 
• Counsellors can guide negative equity 
• Surrender remains a final option

When other alternatives have been exhausted, surrendering the vehicle may be considered as a last resort. In such situations, borrowers can speak with their lenders about goodwill letters to credit bureaus. The goal is to minimize broader credit damage while addressing an unsustainable payment obligation. Although surrender is not presented as a preferred solution, taking decisive action can help vehicle owners address the situation rather than allowing payment problems to continue without communication. 

9. Lenders Need Forward-Looking Risk Management 

Financial institutions need to be thinking not just about how the delinquency rate for auto loans will affect their portfolios in the short term but also the long term. The CECL (Current Expected Credit Loss) accounting standard requires that commercial banks and credit unions hold enough capital to cover their expected credit losses over the life of a loan from the day of origination.  

That has profound implications for institutions that are writing long-dated auto loans with rapidly lengthening maturities, particularly in light of the experiences of borrowers who took out loans during the pandemic. In other words, institutions that are only measuring their CECL exposures based on historical delinquency rates that extend beyond a 12-month window may be severely underestimating the risks for cohorts with extended maturities. 

Better Portfolio Analysis Requires:

• Lifetime expected losses under CECL 
• Forward-looking cohort forecasting 
• Six-month delinquency curve tracking 
• Twelve-month performance comparisons 
• Twenty-four-month exposure monitoring

By focusing on the life of the loan and analysing the delinquency rates for different cohorts and how they compare to historical performance credit unions and commercial banks can begin to get a better sense of the risks involved with different loan sizes, terms, maturities and other characteristics. Long-dated auto loans can behave differently than short-dated loans: The longer the repayment period, the more exposed a borrower is to downside economic risks like job loss or personal injury, as well as the vehicle depreciation. This analysis has bearing on CECL reserves and should be a priority for credit committees at commercial banks and credit unions.

10. Multi-Table Signals Can Reveal Hidden Default Risk 

Portfolio managers need to identify risk signals that go beyond the rudimentary scorecards typically used by auto finance departments. The supplied text discusses the value of using multiple data tables including Loan Origination System records, Loan Management System payment velocity records, and bureau tradelines to understand portfolio performance across different vintages, score tiers, and product categories and to identify risk signals that cut across the data. dot Data Signal Intelligence, Feature Factory, and Insight are three platforms that enable users to discover multi-table signals automatically. 

The importance of doing so can be seen in the example cited in the supplied dot Data analysis, which demonstrates how the presence of multiple factors can increase the risk of default by combining them to generate predictive features using a Glass Box Model (rules-based data mining). In this example, an active secured credit card reflected in bureau tradelines increased the risk of 90-day past due by 39.3 percent (vs. a baseline of 20 percent). An active education loan reflected in bureau tradelines increased the risk by 25.6 percent (also vs. a baseline of 20 percent). 

Hidden Signals Can Transform Risk:

• LOS records reveal origination patterns 
• LMS tracks payment velocity 
• Bureau tradelines add borrower context 
• Combined signals expose interactions 
• Glass Box rules support decisions

When both drivers appeared across multiple extended-dated accounts, the Precision Impact Segment scored 0.443 percent of the portfolio volume with a 50 percent default rate. That has ramifications for the approximately $400 million extended-term used-vehicle portfolio, that segment represents $1.8 million in outstanding balances being stretched across those loans at 2.5x the default rate. With the right multi-table discovery platform, chief risk officers and credit committees can begin to explore similar intersections of variables that may be impacting their portfolio’s performance. From there, they have a number of options: Building Glass Box rules that can be deployed directly in the credit decision engine, or mapping out the impact on term-length mix, negative equity exposure, and other risk factors as roll rates approach the executive suite’s radar.