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Update The Auto Loan Market is in trouble Feb 2 2026
What’s going on in the auto loan market?
In 2025, the delinquencies on automobile loans have hit record high levels. Subprime borrowers, as is usually the case with other loans as well, are the worst of the bunch. Subprime is classified as consumers that have credit scores below 670.
6.65% of subprime borrowers are at least 60 days past due. 3% of auto loans are seriously delinquent which is classified as past 90 days.
Repossessions hit 2.2 million cars, the highest since the Great Recession of 2008/09.
Seeing as the Federal Reserve, in conjunction with the auto manufacturers, reportedly help car dealers by giving them lower then market loan rates, the skyrocketing delinquencies is especially disturbing.
Current loan rates, barring any special programs for consumers with high credit scores, range from 9% for new cars to over 14% for used ones. The average monthly payment is $750.00. Close to 20% of borrowers now have payments exceeding $1,000.00.
The U.S. consumers hold an eye-popping 1.66 trillion in auto debt.
Car insurance rates are not helping, up 19% year over year and the cost to repair a car has jumped more than 33% since 2020.
Auto loans used to be one of the safest loans for lenders to issue back in 2010. In 2025, they are the second riskiest, right behind the student loan market.
What we pay for automobiles, the interest on the loans to buy them and insurance to protect them, all continue to increase as the cost to insurers and car companies rise. The increasing defaults also add to the cost of the interest we pay on auto loans.
Add to that the startling rise in automobile loan fraud initiated by a variety of schemes by thieves and scammers which, as we all know, are becoming more and more prevalent. Scams run the gamut from new forms of money washing, prepayment schemes, partial payment schemes, planned repossession scams along with insurance fraud, auto theft, parts theft and the a laundry list of other schemes that are too lengthy to include here. All of these add to the cost of the companies that sell, service and lend on automobiles which adds to the cost of what consumers pay for all of it.
As a result, the cost of buying, owning, operating, maintaining and financing a car nowadays is continually rising at a startling rate, which is making an already serious problem even worse.
Even with the expected rate cuts from the Federal Reserve, if they do occur, will only reduce borrowing costs minimally. With all the other rising costs in the other areas of car ownership, I doubt things will get better anytime soon.
My suggestion is as always: Buy an older model car with the lowest miles you can find. Insurance rates can be lower with an older car, yet with lower miles, the car will likely last a lot longer and should prolong the time frame before it needs repairs. You might also avoid the single source higher pricing of patented parts making aftermarket parts more available and probably cheaper. As a general rule, older cars are also less complicated than newer ones and probably have a fewer number of those damn onboard computers that cost and an arm and a leg when they go bonkers.
And above all, don’t buy new. You immediately lose thousands of dollars, if not tens of thousands, as soon as you drive the car off the lot. Buy a one year older car if you must have a “new” type of car and let the first buyer take the hit. And if you prefer buying a one year old car in lieu of an older car, buy it from one of the car manufacture’s official dealerships. That way you can still get the original warranty and the official dealership cars usually have a good pre-check and are often called something like “Certified Used Car”.
That’s my two cents and I hope you save more than that.
“Watching the markets so you don’t have to”
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com
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