Late car payments are at a 15-year high. How we got here, and what you can do if you’re feeling the pinch

More Americans are late on their car payments than at any other point in the last 15 years, according to research by Federal Reserve economists, in yet another sign that 2025 hasn’t been kind to consumers.

Federal Reserve economists reported in November that the auto loan delinquency rate, which tracks balances that are at least 30 days past due, reached 3.88% in the third quarter, up from 3.83% in the second quarter. This is about 1.5 times higher than it was in mid-2021 during the COVID-19 pandemic and the highest level since the year after the Great Recession. 

The data does not include “seriously derogatory balances,” or accounts that are typically closed and have been charged off lenders’ books, so the delinquency rate would be even higher if those accounts were factored in.

Economists and industry experts say the slow and steady rise in auto loan delinquencies shows that people are being pushed to the brink financially. 

More and more of Americans’ budgets are being eaten up by car payments. That’s particularly true for people who bought cars during the pandemic, a period when supply chain problems boosted the prices of new and used models and many borrowers’ credit scores were temporarily inflated. 

“Inflation remains a clear omnipresent issue for them [consumers], whether it’s vying to pay their automotive loan, their insurance, their gas bill or their food bill,” said Jeremy Robb, acting chief economist at Cox Automotive. “The consumer is kind of strapped.”

Michael Brisson, automotive economist at Moody’s Analytics, agreed that “the consumer’s not in a good spot.” He added that auto loan delinquency rates present risk to the economy at large — particularly if the labor market weakens.

As economic pressures build and more borrowers fall behind, it’s increasingly important for vehicle owners to know their options. Bankrate compiled a list of suggestions below.

Why are auto loan delinquencies on the rise?

Auto loan delinquencies have been climbing for a simple reason: owning and financing a car has gotten a lot more expensive in recent years.

Average monthly payments jumped nearly 30% between 2020 and 2023, rising from $470 to about $600, according to a separate 2024 analysis by Federal Reserve economists. Higher vehicle prices and sharply higher interest rates are what pushed payments up. In October, the average price of a new vehicle was $49,766, only slightly below September’s record high, according to data from Cox Automotive. 

Rising interest rates have drastically increased the cost of borrowing. A car-buyer who might have qualified for a 5% APR for an auto loan a few years ago might now be quoted 8% or more (and that’s for well-qualified applicants). That difference alone can add $50 or more to a monthly payment. 

Brisson noted that much of the debt that is now slipping into delinquency originated during the early part of the pandemic, when borrowing was both cheaper and easier. 

Credit scores were unusually elevated at the time, partly because government relief and reduced spending boosted household finances. Some borrowers who might’ve normally missed payments looked stronger on paper and qualified for loans they may not have otherwise received, Brisson said.

Many of those loans were also tied to inflated car prices, locking people into bigger balances and monthly payments that are now consuming more of their household budgets.

“Those loans are already on the books — the ones from the loose [credit] era,” Brisson said. “What we’re seeing now is those loans starting to make up more of the majority of loans out there, and that’s what’s led to that steep rise in delinquencies that’s taken place.”

Rising auto insurance premiums are also contributing to higher car ownership costs, forcing many consumers to reevaluate whether more than one car is necessary. The average annual premium is $2,638 in 2025, over a 12% increase from last year, according to Bankrate’s cost of auto insurance report. 

What rising auto loan delinquencies say about the state of Americans’ finances

The rise in auto loan delinquencies underscores how much financial pressure Americans have felt over the last few years.

The financial cushion that helped many families stay afloat during the pandemic has vanished. Savings rates have fallen, credit card and student loan debt are rising, wages haven’t kept up with inflation – making everyday essentials, from groceries to rent, feel more expensive than they were just a few years ago. The job market has also cooled off significantly over the last year, leading to a period of low firing but also low hiring. All of that has left consumers with far less wiggle room in their budgets.

Missed car payments have been creeping up higher, even as the job market and inflation remain relatively in check, suggesting that delinquencies could worsen if wages continue to lag inflation and layoffs begin to rise.

Indeed, some of the most vulnerable consumers appear to have been impacted more than others, so far. The Fed notes 15.78% of subprime auto loans — or loans lent to borrowers with credit scores below 620 — were at least 30 days delinquent on Sept. 30, a high since it started tracking this data in 2000.

Brisson points to decreased retail spending, lacking consumer confidence and decreasing auto loan demand as telltale signs of this strain. Americans who might otherwise aim to purchase a car may have already hit their risk tolerance.

“2025 is just the year when all this stuff is just really hitting,” Robb said. “And some consumers — more of them than have been in the past — are more impacted with, ‘How do they keep all those things afloat?”

Auto dealers and finance companies seem to be taking notice and are tightening access to car loans. They denied 15.2% of applications in October, double the 6.7% reported in June, according to Federal Reserve Bank of New York data.

What you can do about it

If you’re an auto loan borrower in danger — or in the midst — of delinquency, timing is of the essence. While it’s never too late to make a move, it’s always helpful to take action sooner than later. 

Typically, the best first step is to contact your lender. You might be surprised to learn that they offer a hardship program or loan modification. But before you commit to anything, review all of your options.

Taking the right action is as important as speed, as it can protect your credit and personal finances — and give you a better chance of avoiding repossession.