Auto loan delinquencies in the US are surging, with more Americans missing payments as car prices and interest rates climb to record highs. A recent VantageScore study reports that auto loan delinquency rates have jumped more than 50% over the last 15 years, making auto loans—aside from student debt—the riskiest major credit product today, per CBS News. This marks a sharp reversal from 2010, when auto loans were considered the safest. The Federal Reserve's latest data showed delinquencies at 3.8% as of June 2024, the highest level since the same month in 2010, and the problem is widespread across all income groups, with prime borrowers falling behind at a faster pace than subprime borrowers.
The core issue is sharply rising monthly payments. The average car payment is now around $600, up $130 in just three years, and 1 in 5 new car loans now come with a monthly bill of more than $1,000. The average new vehicle price has topped $50,000, and interest rates on car loans have climbed to 7% for new cars and 11% for used ones, per Edmunds. These factors are pushing buyers to take out larger loans for longer terms, increasing the risk they'll owe more than their car is worth as it depreciates (the AP has more on what to do if you've got negative equity on your ride). CNBC notes that these spiking car prices and payments suggest a "'K-shaped' economy, where the wealthy keep seeing gains while those who have lower incomes struggle."