Auto owners have missed monthly payments at the highest rate for over 30 years.
In January, the percentage of subprime car borrowers who were at least 60 days past their loans rose to 6.56%, according to Fitch Ratings. The slowing economy and the continued impact of inflation have made it even more difficult for many consumers to keep up with their bills. Auto loans are particularly cumbersome as foreclosures have skyrocketed due to rising car prices and higher borrowing costs.
The Federal Reserve Bank of New York recently reported that the percentage of car loans for all borrowers that have transitioned to serious delinquency, defined as more than 90 days of past, traveled to 3% in the fourth quarter, the highest level since 2010.
This latest increase in arrears among subprime borrowers is a critical time for the US economy as the trade war under President Donald Trump creates volatility in the stock market and raises concerns about slowing economic growth.
Delinquency increases in January and February, following the holiday spending season. Fitch classifies subprime car borrowers as people with credit scores of 640 or less. In contrast, those with higher scores are getting better, with only 0.39% of key borrowers rising at least 60 days ago in January, from 0.35% the previous year.
Other economic indicators point to declining financial health among Americans. Consumer debt has skyrocketed recently, reaching the highest level on record, but consumer confidence has fallen the most since 2021.
