Why a Record Share of Subprime Borrowers Are Falling Behind on Their Car Loans

Americans are paying more than ever to finance a car, and a growing number can no longer keep up. The share of subprime borrowers who are at least 60 days behind on their auto loans has climbed to its highest level in 32 years, a record that stretches back to January 1994. At the same time, the average new-car payment now sits around 722 dollars a month and the average price of a new vehicle hit an all-time high above 50,000 dollars late last year. Whether you are carrying a loan, thinking about a new one, or shopping for a used car, this is a trend that touches your wallet.

The numbers point to financial strain concentrated among the buyers who can least afford it, and to a lending system that has stretched loan terms and loan sizes to keep monthly payments looking manageable. Here is what the data shows, how the market reached this point, and the specific steps that protect you from becoming part of the statistic.

What the Latest Data Shows

Data published by Fitch Ratings and analyzed by industry observer Bill Ploog shows that in January 2026 the subprime 60-plus-day delinquency rate reached a record 6.90 percent, up 34 basis points from a year earlier and the worst reading in 385 months of records. The rate edged down only slightly to 6.80 percent in February, still above the same month a year before. For context, a borrower who is 60 or more days past due is at the point where lenders begin seriously considering repossession, which often ends with the vehicle sold at auction for less than the balance owed.

The pain is not spread evenly. Prime borrowers, those with strong credit, are paying on time at healthy and stable rates. The record delinquencies are concentrated among subprime borrowers with lower credit scores, the group most exposed to high interest rates and stretched budgets. As one CarEdge analysis put it, the crisis is concentrated squarely among those who can least afford it.

Meanwhile the cost of buying keeps climbing. The average price of a new car reached a record 50,326 dollars in December 2025, according to Cox Automotive, and the average monthly payment on a new-car loan reached about 722 dollars in 2025, up around 2.4 percent year over year. Interest rates make the gap between credit tiers stark. Experian data put the average new-car rate near 4.66 percent for super-prime borrowers in late 2025 and around 16.01 percent for the deepest subprime tier. On a five-figure loan, that difference adds thousands of dollars over the life of the contract.

How Car Loans Got This Big

Several forces combined to push loans to these levels. The clearest is the rise of ultra-long terms. Seventy-two-month, 84-month and even 96-month loans have become common, and some credit unions now advertise 120-month, or 10-year, car loans. Stretching the term lowers the monthly payment but keeps the borrower underwater on a depreciating asset for years, owing more than the car is worth well into the loan.

Roughly one in five new-car buyers now signs up for a seven-year loan. Industry veterans warn that those deals quietly remove buyers from the market. As CarEdge co-host Ray Shefska put it, when you put people into 84-month and 96-month auto loans, you are essentially taking them out of the market, because they cannot trade in or upgrade for the better part of a decade. The decline of leasing made this worse. Leasing once accounted for around a third of new-vehicle sales and cycled buyers back every three years, but it has fallen to roughly 17 to 18 percent, leaving long-term financing to fill the gap.

Lending standards loosened too. Reports last year described lenders piloting loan-to-value ratios above 140 percent for subprime borrowers, meaning the loan was worth far more than the car itself. Record levels of negative equity, where buyers roll the unpaid balance of an old loan into a new one, have compounded the problem. The result is a market where many buyers owe more than their vehicle could ever fetch, and where a single missed paycheck can tip a household into delinquency.

What It Means for Prices and the Wider Economy

For shoppers, there is a possible silver lining. If more borrowers are priced out or locked into long loans, demand should soften, and softer demand against steady supply tends to bring prices down over time. That could eventually mean more affordable cars. The catch, analysts caution, is that creative lending designed to squeeze more buyers into the market could delay any real correction, and automakers may trim production to avoid flooding lots with unsold inventory.

It would be a mistake to read the record delinquency figure as a sign that the whole economy is about to stall. Forecasters at TransUnion expect overall auto delinquencies to move only marginally, predicting a rate near 1.54 percent at the end of 2026 versus an estimated 1.51 percent at the end of 2025. The alarming number is specific to the subprime slice of the market. But that slice is large enough, and the parallels to past credit bubbles familiar enough, that it deserves attention from anyone about to take on a car payment.

What To Do Before You Sign

The single most useful habit is to stop shopping by monthly payment and start looking at the total cost. Ask for the full price, the interest rate, the term in months, and the total you will pay by the end. A low monthly figure spread over seven or eight years almost always hides a much larger bill. As a rule, avoid terms longer than 60 months on a depreciating vehicle, and put down enough that you are not immediately underwater.

Check the loan-to-value ratio. If a lender is willing to finance significantly more than the car is worth, treat that as a warning rather than a convenience. Be honest about affordability: if the only way the numbers work is a long term at a high rate, the car is probably too expensive for your budget, and a cheaper, reliable option will serve you better. If you already hold a high-rate loan and your credit has improved, look into refinancing, and consider gap insurance if you owe more than the vehicle is worth so a write-off does not leave you paying for a car you no longer have. For more on the squeeze facing owners, see our coverage of rising US car insurance costs and used-car prices topping 30,000 dollars.

The record in subprime delinquencies is more than a headline. It is a signal that the way many Americans finance cars has drifted away from what they can comfortably repay. Being deliberate about the total cost, the term and the down payment is the most reliable way to keep a car loan from becoming a trap.

Sources:

• https://caredge.com/guides/auto-loan-crisis-32-year-record
• https://wolfstreet.com/2026/05/19/auto-loan-balances-debt-to-income-ratio-and-delinquencies-of-subprime-prime-auto-loans-in-q1-2026-how-bad-is-it/
• https://money.com/car-loan-delinquencies-record-high/
• https://www.autoblog.com/news/new-car-payments-hit-722-as-1-in-5-buyers-take-7-year-loans