Key Highlights
- Americans are increasingly falling behind on their auto loan payments.
- The increase in delinquency rates is attributed to rising car prices and interest rates.
- The risk of borrowers becoming underwater has increased due to faster depreciation of cars.
- Economic conditions, including inflation and wage stagnation, are contributing factors.
Auto Loan Delinquency Rates on the Rise
A recent study by VantageScore reveals that more Americans are struggling to keep up with their auto loan payments. The delinquency rate for car loans has risen by over 50% since 2010, marking a stark contrast to other loan categories such as credit card and personal loans, which have seen declining rates.
Factors Contributing to Increased Delinquencies
The primary driver behind the growing number of delinquent auto loan payments is the surge in car prices and interest rates. According to data from the Federal Reserve, average monthly car loan payments have increased by nearly $130 since January 2020. This rise has been more significant than the growth seen in other types of loans over the same period.
Stephen Kates, a financial analyst at Bankrate, explains that higher vehicle costs and interest rates are prompting more buyers to finance their purchases, often at increased rates. The average auto loan rate for new cars is currently 7%, while used car loans hover around 11% as of September 2025.
Economic Pressures Exacerbate the Issue
Broader economic conditions are also playing a role in the rise of delinquencies. Susan Fahy, executive vice president and chief digital officer at VantageScore, notes that inflation and an unsteady employment picture contribute to these challenges. Despite some cooling from its peak, inflation continues to affect American wallets.
A Bankrate analysis of Bureau of Labor Statistics data shows that average wages are still trailing behind inflation and won’t catch up until mid-2026.
These economic pressures are impacting various household income levels. VantageScore’s data indicates that delinquency rates among prime borrowers have increased more significantly than subprime borrowers on an absolute basis, suggesting a broader-based decline in consumer credit quality.
Risk of Becoming “Underwater” Increases
The risk of becoming “underwater,” or owing more on the loan than the car is worth, has also risen. Rikard Bandebo, chief economist at VantageScore, warns that this can lead to further financial strain for borrowers. As cars depreciate faster than they are paid down, the likelihood of being underwater increases, making it harder for individuals to afford their payments.
The average loan amount has also increased by 57% over the last 15 years, according to VantageScore. This increase is more pronounced in auto loans compared to other categories such as mortgages, highlighting the financial burden placed on car buyers.
Conclusion
The increasing delinquency rates in auto loans reflect a complex interplay of economic factors and rising costs. As vehicle prices continue to climb and interest rates remain high, consumers face growing challenges in managing their finances. This trend not only affects individual households but also has broader implications for the automotive industry and overall economic stability.
