More Americans are falling behind on their auto loan payments. Here’s why.

Americans are finding it increasingly challenging to keep up with their auto loan payments as car prices and interest rates reach record highs. A recent study by VantageScore revealed that delinquency rates on auto loans have surged by more than 50% over the past 15 years, contrasting with the declining delinquency rates in other loan categories such as credit card loans, personal loans, and home equity loans.

Rikard Bandebo, chief economist at VantageScore, highlighted the shift in auto loans from being the least risky to the riskiest credit product, excluding student loans, by 2025. This trend is evident in the data showing a significant increase in delinquency rates from 2010 to 2025.

The Federal Reserve’s data further emphasizes the concerning rise in auto loan delinquency rates, reaching 3.8% in June 2024, the highest level since June 2010. This increase is observed across all income groups, with prime borrowers experiencing a faster climb in delinquency rates compared to subprime borrowers.

Susan Fahy, executive vice president and chief digital officer at VantageScore, pointed out the broad-based decline in consumer credit quality, indicating economic pressures affecting various credit tiers and income levels. The average loan amount has also seen a substantial 57% increase over the last 15 years, surpassing the growth in other loan categories like mortgages.

One of the primary reasons behind the rise in delinquency rates is the escalating monthly payments for car owners. Federal Reserve data shows a significant jump in average monthly payments from $470 in January 2020 to $600 in January 2023, driven by rising car prices and interest rates. The average cost of a new vehicle now exceeds $50,000, the highest on record, leading more buyers to finance their purchases at higher interest rates.

Stephen Kates, a financial analyst at Bankrate, highlighted the impact of elevated prices and borrowing costs on longer loan terms, increasing the risk for borrowers as their cars depreciate faster than they pay down the loan. Economic factors like inflation and employment instability have also contributed to the rise in auto loan delinquencies.

Despite a slight decline in inflation from its peak in 2022, many Americans are still grappling with high prices. A Bankrate analysis revealed that average wages are trailing behind inflation, creating financial strain for individuals. This challenging economic landscape, coupled with soaring car prices and interest rates, underscores the struggles Americans face in keeping up with their auto loan payments.