US Car Loan Delinquencies Hit a 32-Year High as Subprime Borrowers Fall Behind

• Fitch Ratings data shows subprime auto loan delinquencies hit a 32-year high in January 2026, and after briefly improving, deteriorated again in July to 6.13 percent of borrowers 60 or more days behind.
• Repossessions are on pace for roughly 3 million vehicles this year, approaching the 3.2 million seen during the 2009 financial crisis, according to Cox Automotive estimates.
• Extended 84- and 96-month loan terms, near-$50,000 average vehicle prices and record negative equity are combining to trap borrowers in payments they cannot sustain.

The Worst Stretch for Car Loans in Three Decades

Millions of American car owners are falling behind on their auto loans at a pace the industry has not recorded in more than three decades. Fitch Ratings, which tracks delinquency performance across securitized subprime auto loans, found that borrowers 60 or more days past due hit their highest level in 32 years in January 2026, a stretch of data going back to 1994. The rate eased through the spring, helped in part by tax-refund season, falling to 5.80 percent by the close of the second quarter. That relief did not last. Fitch’s July figures show subprime delinquencies climbing back up to 6.13 percent, a reversal the ratings agency attributes to affordability pressures that are landing hardest on lower-income borrowers carrying heavy debt loads, in what analysts are calling a K-shaped economy, where prime borrowers stay financially healthy while subprime borrowers fall further behind.

Prime borrowers, those with strong credit, are not seeing anything close to the same stress. Their delinquency rates have stayed stable and low throughout 2026. The divide between the two groups has widened to a degree that industry veterans compare to conditions before the 2008 housing crash, not from identical lending products, but from the same pattern of loosening qualification standards and rising loan amounts against a weakening borrower base.

What Happens When a Borrower Falls 60 Days Behind

A 60-day delinquency is the point at which lenders typically begin the repossession process in earnest. Once a vehicle is seized, it is usually sent to auction and sold for well below the remaining loan balance, leaving the borrower without a car and with a damaged credit file, while the lender absorbs a loss on the difference. Cox Automotive estimates that roughly 1.7 million vehicles were repossessed in 2024, the highest annual total in fifteen years, and industry tracking suggests 2026 is on pace for close to 3 million, nearing the 3.2 million repossessed during the depths of the 2009 recession.

Ray Shefska, a longtime auto industry figure and co-host of the CarEdge Live broadcast, has been blunt about what the numbers represent. “What more clearly do you need to see that suggests there’s a bubble going on?” he said, pointing to the extended stretch of high subprime delinquency data. His co-host on the program raised a related concern about who is buying the bonds backed by these loans: “Why would you look at these stats, look at that chart, and say ‘yeah, let’s buy that stuff’? What could possibly go wrong? We are at a 32-year high, and yet it doesn’t set off alarm bells on Wall Street.”

How Long Loan Terms Trap Buyers

Part of what separates this cycle from past downturns is the length of the loans themselves. Seventy-two, 84 and even 96-month auto loans have become common, and some credit unions now offer terms stretching to 120 months. Average new-vehicle prices near $50,000 have pushed monthly payments to $770 to $786, and lenders have responded by extending terms rather than requiring larger down payments. The tradeoff leaves close to 30 percent of trade-ins underwater, meaning the owner owes more than the car is worth well into the loan’s life.

Brian Binstock, a well-known figure in automotive retail, has described 84-month loans as “a death trap for customers,” arguing that dealers chase short-term commission gains without accounting for what happens years later. Shefska made a similar point about the broader effect on the market: “When you put people into 84-month and 96-month auto loans, you are essentially taking them out of the market. Two or three years from now, the same dealers are going to be wondering how to get their customers back. You don’t. You can’t.” A buyer locked into a seven-year loan cannot trade in or upgrade without rolling negative equity into the next purchase, which compounds the problem with each successive vehicle.

What Car Buyers Should Check Before Signing

Anyone shopping for a vehicle right now can protect themselves with a few concrete steps. Ask the finance office for the total cost of the loan, not just the monthly payment, so the full interest expense over 72 or more months is visible before signing. Compare the loan amount against the vehicle’s actual market value using an independent source, and treat any offer to lend significantly more than the car is worth as a warning sign rather than a convenience. Shorter terms of 48 to 60 months cost more per month but leave far less exposure to being underwater if the vehicle needs to be sold or traded before the loan is paid off.

For current owners already struggling with payments, contacting the lender before missing a payment, rather than after, opens more options, including temporary deferment or loan modification in some cases. Once an account crosses 60 days past due, the lender’s flexibility narrows considerably and repossession becomes the more likely outcome. Nonprofit credit counseling services can also review a loan’s terms and help borrowers understand whether refinancing at a shorter term or lower rate is realistic given their current credit standing.

Sources:

• CarEdge: The Auto Loan Crisis Just Hit a 32-Year Record
• The Motley Fool: Loan Delinquencies Edge Lower in Q2, but Some Remain at Very High Levels
• Fitch Ratings