Auto loan delinquencies are climbing, and what that tells you about your own loan
An auto loan delinquency happens when you miss a payment by 30 days or more. Right now, the share of car loans that are delinquent is higher than it has been in years — meaning more borrowers are falling behind than at any point since the pandemic. This matters to you whether you own a car or are thinking about buying one, because delinquency trends show what happens when car prices stay high, interest rates climb, and monthly payments stretch household budgets.
The rise in delinquencies is not random. It follows a pattern: used car prices stayed elevated longer than expected, new car loans carry higher interest rates than they did five years ago, and people who took out loans during the pandemic are now facing payment shock as their financial situations change. When delinquencies rise across the industry, lenders tighten their standards, which means fewer people can get approved for loans and those who do pay higher rates.
Key Takeaways
- A delinquency starts at 30 days past due and stays on your credit report for seven years, even after you catch up on payments.
- Delinquency rates are climbing because monthly car payments have grown faster than household incomes, forcing some borrowers to choose between the car payment and other bills.
- If you fall behind, your lender can repossess your car without warning in most states, usually after 60 to 90 days of missed payments.
- Catching up before you hit 30 days late protects your credit score and prevents repossession; after 30 days, the damage is already done to your report.
- Rising delinquencies make lenders more cautious, which means higher interest rates and stricter approval standards for future borrowers.
Why delinquencies are rising right now
Monthly car payments have climbed sharply over the past three years. The average new car loan payment is now significantly higher than it was in 2020, driven by both higher vehicle prices and higher interest rates. At the same time, used car prices — which fell from their pandemic peak but remain above pre-pandemic levels — have kept the cost of entry into car ownership high for people with lower credit scores or smaller down payments.
Borrowers who took out loans when rates were lower are now refinancing into higher rates, or they are straightforward running out of money as other costs rise. Inflation has hit groceries, housing, and utilities, leaving less room in household budgets for a $500 or $600 monthly car payment. People who were managing fine in 2022 are now choosing to stop paying the car loan because they cannot pay both the car and the rent.
Subprime borrowers — those with credit scores below 620 — are delinquent at much higher rates than prime borrowers. This group was already stretched thin, and rising interest rates pushed their payments even higher. Some lenders who specialize in subprime loans have seen delinquency rates double or triple in the past year.
What happens to your credit when you fall behind
The moment you miss a payment, your lender reports it to the credit bureaus. At 30 days late, the delinquency appears on your credit report and your credit score drops — usually by 100 points or more, depending on your starting score. This single late payment can stay on your report for seven years, even after you pay the loan off.
At 60 days late, most lenders begin sending collection notices and may start the repossession process. At 90 days late, repossession is nearly certain. The car is taken, sold at auction, and you still owe the difference between what it sells for and what you owe — called a deficiency. That deficiency becomes a debt you must pay, and the lender can sue you for it.
The credit damage from a delinquency is severe and long-lasting. Even after you catch up or pay off the loan, the late payment remains on your report. Future lenders see it and charge you higher interest rates on mortgages, personal loans, and credit cards. Some employers and landlords also check credit reports, so a delinquency can affect your ability to rent an apartment or get hired.
The difference between 30, 60, and 90 days late
At 30 days late, you have crossed into delinquency territory. Your credit report is damaged, but your car is still yours and your lender is still willing to negotiate. This is the moment to call your lender and ask about forbearance — a temporary pause or reduction in payments — or a loan modification that lowers your monthly payment by extending the loan term.
At 60 days late, repossession becomes legal in most states. Your lender may begin the process, though many wait until 90 days to give borrowers a final chance. At this stage, your options narrow. Forbearance is less likely to be offered, and your lender is focused on recovering the car or the full loan amount.
At 90 days late, repossession usually happens. In most states, a lender does not need to take you to court first — they can straightforward hire a repossession company to take the car. You will have no warning. After repossession, you owe the deficiency, and the lender can pursue you for it through the courts.
What you can do if you are falling behind
Call your lender before you miss a payment, not after. Lenders have programs for borrowers in hardship, and they prefer to work with you rather than repossess. Ask specifically about forbearance, which pauses or reduces your payment for a set period — usually two to six months. Forbearance does not erase the missed payments, but it gives you breathing room and keeps repossession off the table.
If forbearance is not an option, ask about a loan modification. This restructures your loan by extending the term, which lowers your monthly payment. It costs you more in interest over time, but it keeps you in the car and protects your credit if you can make the new payment.
If you have already missed a payment, catch up as soon as you can. Paying before you hit 30 days late prevents the delinquency from appearing on your credit report. After 30 days, the damage is done, but paying when ready stops the clock on repossession and shows your lender you are serious about catching up.
If you cannot afford the car, you have the option to surrender it voluntarily. This is less damaging than repossession — you avoid the deficiency judgment and the repossession fee — but it still hurts your credit and leaves you without a car. Explore this only after talking to your lender about forbearance and modification.
How rising delinquencies affect future borrowers
When delinquency rates climb, lenders respond by tightening their standards. They approve fewer loans, require larger down payments, and charge higher interest rates to offset the risk. This creates a cycle: borrowers with lower credit scores or smaller down payments face even higher rates, which makes their payments even less affordable, which increases the chance they will become delinquent.
Lenders also pull back from subprime lending entirely during periods of high delinquency. This leaves people with poor credit with fewer options and forces them toward buy-here-pay-here dealers or other high-cost alternatives. The people most hurt by rising delinquencies are not those who are already delinquent — they are future borrowers trying to get into a car when lenders are scared.
Frequently Asked Questions
Does one missed payment hurt my credit score?
Not when ready. One missed payment does not appear on your credit report until you are 30 days late. However, your lender may charge a late fee and report you to the credit bureaus at the 30-day mark. If you pay before then, no delinquency appears on your report, though the lender may still charge the fee.
Can my lender repossess my car without warning?
Yes, in most states. Once you are in default — usually defined as 60 to 90 days late — your lender can hire a repossession company to take the car without notifying you first or going to court. The only exception is if your state requires notice, which a few do. Check your loan agreement and your state's laws.
What is a deficiency and am I responsible for it?
A deficiency is the amount you still owe after the car is repossessed and sold at auction. If you owe $15,000 and the car sells for $10,000, the deficiency is $5,000. You are responsible for it, and the lender can sue you to collect. Some states limit deficiency claims, so check your state's law.
Will forbearance hurt my credit score?
Forbearance itself does not appear on your credit report as a negative mark. However, if you miss payments before forbearance begins, those missed payments are reported. Forbearance stops future damage but does not erase past late payments. Ask your lender to report the forbearance arrangement to the credit bureaus so they understand the situation.
If delinquencies are rising, should I wait to buy a car?
Rising delinquencies mean higher interest rates and stricter approval standards, so waiting may not help. Interest rates are set by market conditions and your credit score, not by delinquency trends. If you need a car now and have the means to pay, waiting will not lower your rate. If you are on the edge of affordability, waiting gives you time to improve your credit score or save a larger down payment.