Auto loan delinquencies are rising in 2025, and the trend matters whether you own a car or are thinking about buying one

A delinquency occurs when a borrower misses one or more monthly car payments. In 2025, the rate at which borrowers fall behind on auto loans has climbed compared to the previous two years, signaling financial stress among car owners and shifting conditions in the lending market. This matters to you because delinquency rates affect interest rates lenders offer, the availability of credit, and the used car market — all of which touch your wallet whether you're currently paying off a car or planning to finance one.

The increase reflects a combination of factors: higher monthly payments due to elevated vehicle prices and interest rates, inflation eating into household budgets, and the end of pandemic-era payment deferrals and stimulus money. Subprime borrowers — those with credit scores below 620 — are experiencing the sharpest rise in delinquencies, though the trend is visible across all credit tiers.

Key Takeaways

  • Auto loan delinquency rates in 2025 are higher than in 2023 and 2024, driven by higher monthly payments, inflation, and reduced household savings.
  • Subprime borrowers (credit scores below 620) are falling behind at faster rates than prime borrowers, but delinquencies are rising across all credit categories.
  • If you miss a payment, contact your lender when ready — most offer hardship programs, payment deferrals, or loan modifications before repossession becomes an option.
  • Rising delinquencies typically lead lenders to tighten credit standards, meaning lower credit scores and higher down payments will be required for future auto loans.
  • Used car prices may decline as more vehicles enter the market through repossession and auction, which can affect the value of cars you currently own.

Why delinquencies are climbing in 2025

Monthly auto loan payments have reached historic highs. The average new car payment now exceeds $500 per month for many borrowers, and used car loans average in the $400 range. These figures reflect two separate pressures: vehicle prices remain elevated despite cooling from their 2021–2022 peaks, and interest rates — which lenders use to price risk — have stayed above 6% for most borrowers in 2025.

Household budgets have tightened. Inflation has reduced purchasing power for groceries, housing, utilities, and fuel. At the same time, credit card debt has grown, and personal savings rates have fallen from pandemic highs. For households already stretched, a car payment that was manageable in 2022 becomes difficult to sustain in 2025.

The pandemic-era safety net has disappeared. Between 2020 and 2022, many borrowers received payment deferrals, stimulus checks, and enhanced unemployment benefits. Those programs ended. Simultaneously, the Federal Reserve raised interest rates aggressively to combat inflation, which increased the cost of borrowing and reduced the purchasing power of households that had relied on low rates.

How delinquency rates are measured and reported

Delinquency is tracked in stages. A loan is considered 30 days delinquent when a payment is one month late, 60 days delinquent at two months late, and 90 days delinquent at three months late. Most industry reporting focuses on loans that are 60 or 90 days past due, because these represent borrowers who are unlikely to catch up without intervention.

The data comes from multiple sources. The Federal Reserve publishes delinquency rates through its quarterly reports on consumer credit. Equifax, Experian, and TransUnion — the three major credit bureaus — track delinquencies across their portfolios. Auto finance companies and banks report their own figures to investors. These sources sometimes report slightly different numbers because they measure different populations and time periods, but the direction is consistent: delinquencies are rising.

In early 2025, the 60+ day delinquency rate for auto loans stood between 1.5% and 2.0% depending on the source and measurement period — higher than the 1.2% to 1.5% range seen in 2023 and 2024. For subprime borrowers, the rate has climbed above 4% in some reports, compared to roughly 2.5% to 3% in the prior two years.

What happens to your credit and your car when you fall behind

Missing a payment damages your credit score when ready. A single 30-day late payment typically reduces your score by 100 points or more, depending on your starting score and credit history. The damage compounds as delinquency deepens: a 90-day delinquency is more severe than a 60-day, and both remain on your credit report for seven years.

Repossession becomes a legal option for the lender once you are 60 to 90 days delinquent, though most lenders attempt contact and offer solutions before taking that step. The lender does not need a court order in most states; they can send a repo agent to take the car from your driveway, street, or workplace. Repossession itself costs you the vehicle and typically triggers a deficiency judgment — you still owe the difference between what the car sells for at auction and what you owe on the loan, plus fees.

If you receive a notice of delinquency or a call from your lender, contact them when ready. Most major lenders offer hardship programs that include payment deferrals (skipping one or two months and adding them to the end of the loan), loan modifications (extending the term to lower the monthly payment), or temporary payment reductions. These options are not automatic, but they are far more common than repossession and require only that you reach out before the lender has already decided to pursue collection.

How rising delinquencies affect interest rates and credit availability

When delinquency rates rise, lenders respond by tightening their standards. They raise interest rates for borrowers with lower credit scores, increase required down payments, and reduce the maximum loan amount they will offer. This creates a feedback loop: borrowers who can least afford higher payments face the highest rates, making their situation worse.

In 2025, this is already visible. Subprime borrowers (credit scores below 620) are seeing rates in the 10% to 15% range, compared to 7% to 9% in 2023. Prime borrowers (scores 660 and above) have seen smaller increases, but even they are paying more than they would have two years ago. Lenders are also requiring larger down payments — 15% to 20% for subprime loans, versus 10% to 15% in prior years.

The effect extends beyond auto loans. When auto lenders tighten credit, they reduce the total amount of credit available in the market. This can push borrowers toward alternative lenders with worse terms, or toward used cars instead of new ones, which shifts demand and pricing across the entire vehicle market.

The used car market and repossession auctions

Rising delinquencies increase the supply of used cars available for sale. When vehicles are repossessed, they are typically sold at auction — either through the lender's own channels or through third-party auction houses like Manheim or ADESA. These cars then flow into the used car market at wholesale prices, which eventually affects retail prices.

In 2024 and early 2025, used car prices have declined from their 2021–2022 peaks, partly because of increased repossession volume. If you own a used car, this means your vehicle's resale value may be lower than it would have been in a tighter market. If you are shopping for a used car, it means more inventory and potentially better prices — but also a higher risk of buying a car with a history of payment problems or mechanical issues that contributed to the original owner's financial stress.

Repossession auctions are not open to the general public in most cases; they are wholesale channels for dealers and fleet buyers. However, cars from these auctions eventually reach retail lots and online marketplaces like Autotrader, CarGurus, and Facebook Marketplace. When shopping for a used car, a vehicle history report (available through Carfax or AutoCheck) will show whether a car has been repossessed, though the report may not always capture every detail.

What you can do if you are behind on payments

Contact your lender as soon as you know you will miss a payment. Do not wait for a collection call. Most lenders have dedicated hardship departments that handle these situations. You can find the number on your loan statement or the lender's website.

Explain your situation clearly: job loss, medical emergency, reduced hours, or other specific hardship. Lenders are more likely to work with borrowers who communicate proactively than with those who ignore notices. Have your loan number and account information ready.

Ask about specific options: payment deferral (postponing one or two payments), loan modification (extending the term to lower the monthly payment), or a temporary reduction in the monthly payment. Some lenders also offer forbearance, which pauses payments for a set period without adding them to the end of the loan, though this is less common than deferral.

Get any agreement in writing before you stop making payments. Verbal agreements are difficult to enforce if the lender later claims you did not reach a deal. The written agreement should specify the new payment amount or schedule, the duration of the arrangement, and what happens when it ends.

Frequently Asked Questions

Will my credit score recover if I get caught up on payments?

Yes, but slowly. A late payment stops damaging your score once you bring the account current, but the late payment itself remains on your credit report for seven years. Your score will gradually improve as the late payment ages and as you build a record of on-time payments going forward. Most borrowers see meaningful improvement within 12 to 24 months of catching up.

Can a lender repossess my car if I am only 30 days late?

Legally, most lenders can repossess once you are one payment behind, but in practice they rarely do. Most wait until you are 60 to 90 days delinquent. However, your loan contract determines the exact trigger, so check your paperwork or call your lender to understand your specific terms. Contacting your lender before you reach 60 days late is your best protection.

If my car is repossessed, do I still owe the loan?

Yes. The lender sells the car at auction and applies the proceeds to your loan balance. If the sale price is less than what you owe — which is common — you are responsible for the difference, called a deficiency. You also owe the lender's repossession and auction fees. The lender can pursue a deficiency judgment against you in court to collect the remaining amount.

Are delinquency rates expected to improve in the second half of 2025?

That depends on whether household incomes keep pace with inflation and whether interest rates decline. If the Federal Reserve lowers rates and inflation slows, borrowers may have more breathing room. However, most forecasts suggest delinquencies will remain elevated through 2025 compared to 2023 levels, though the rate of increase may slow.

How do I know if my lender offers hardship programs?

Call the customer service number on your loan statement and ask directly. Most major lenders — including banks, credit unions, and captive finance companies like Ford Credit and GM Financial — have formal hardship programs. Smaller lenders may be less structured but still willing to negotiate. The key is to ask before you miss a payment, not after.