If you have been to your local dealer lately, taken a look or two on car-buying websites, or curiously looked at the newest cars from any automaker these days, you are probably more than aware that new cars are very expensive.
While many market options fall far short, the latest data from Kelley Blue Book and Cox Automotive says that the average new car in the U.S. cost buyers a whopping $48,641 in January 2025, breaking a four-month trend of ever-increasing prices.
But while it may seem like the tide is turning in favor of new car buyers, a new report reveals that many buyers are taking extraordinary measures and putting themselves in financial trouble to get that new set of wheels.
A Ford dealership in Los Angeles, California New Fitch Ratings data shows that 6.56% of subprime auto loan borrowers are at least 60 days delinquent.
Beware of the car loans [you can’t pay]
According to a new Bloomberg report, Americans are falling behind in car payments at levels that would make Dave Ramsey’s blood boil.
Per Fitch Ratings, Americans are missing car payments at a rate not seen in over 30 years. According to them, 6.56% of subprime auto loan borrowers are behind on their payments by at least 60 days.
Fitch defines subprime auto borrowers as those with credit scores of 640 and below, which falls within and below the ‘Fair’ range used by FICO. According to FICO, borrowers in this category have a below-average score “though many lenders will approve loans with this score.”
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The lasting impacts of inflation and a stunted economy are putting pressure on many consumers to keep up with their bills. According to additional New York Federal Reserve data, 3% of auto loan borrowers were in “serious delinquency;” payments were 90 days or more past due.
The stubbornly high price of new and used cars and high interest rates have made car loans a sticking point for some consumers, which has, unfortunately, driven a rise in auto repossessions.
“The lower income level has been really affected, and we expect that to continue to be the case this year,” Fitch Ratings North American asset-backed securities senior director Mike Girard told Bloomberg. “There’s still the continued impact from higher inflation and interest rates.”
Auto loan delinquency rates are often seasonal
Girard notes that auto loan delinquencies typically spike in January and February after buyers splurge on the holidays. However, they usually improve in March and April as some borrowers use some of their tax refund checks to pay their bills.
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However, the spike in auto loan delinquencies among subprime borrowers is pivotal for the U.S. car industry. Since taking office in January, President Donald Trump has been sparring with its biggest trade partners in a tariff battle that has left the industry in limbo.
Earlier this week, experts at Cox Automotive warned that 25% cross-border tariffs on Mexican and Canadian imports can “likely upend the auto market in the United States.” Though the administration fulfilled a one-month carveout on the request of Detroit’s Big Three, Cox Auto Chief Economist Jonathan Smoke warns that the tariffs pose a threat at a critical time for the industry.
“This is happening at a moment when supply is tight already, and just as tax refund season approaches critical mass in dollars being distributed to consumers,” he said in a statement. “Consumers with potential buying plans are very likely to act swiftly, so the short term is likely positive for sale volume. But once prices shift higher, demand will decline.”
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