Inflation and a challenging job market are increasingly placing strain on lower-income Americans trying to keep up with their car loan payments. Recent data indicates that missed payments on auto loans are rising significantly among this group, reflecting broader economic pressures that many families are facing nationwide.
Auto loan delinquency rates have climbed sharply over the past 15 years, with a recent study from VantageScore showing an increase of more than 50% from 2010 to 2025. While auto loans were once among the safest types of consumer credit, they now rank as one of the riskiest outside of student loans. As of June 2024, the Federal Reserve reported that the share of car loan balances at least 30 days past due was 3.8%, the highest level since 2010. This troubling trend spans all income brackets but is especially pronounced among lower-income borrowers, who typically have subprime credit scores below 670.
The average monthly car loan payment has surged in recent years, creating mounting pressure on household budgets already squeezed by inflation and uneven wage growth. Data from the Federal Reserve shows that monthly payments rose approximately $130 from January 2020 to January 2023, reaching around $600. By comparison, the increase in the previous three years was only about $40. Additionally, nearly 20% of new car loans now come with monthly payments over $1,000, a figure that puts substantial strain on consumers with tight financial margins. This jump is linked to rising new car prices, which recently surpassed $50,000, and higher interest rates that have pushed average loan rates to around 7% for new vehicles and 11% for used cars as of September 2025.
Subprime borrowers are bearing the brunt of this rising financial burden. Fitch Ratings reported that more than 6% of subprime auto loans were at least 60 days overdue in 2025, a record-high delinquency rate. This figure has doubled since 2021 and has surpassed levels seen during major previous U.S. economic downturns. Vehicle repossessions have also climbed, reaching their highest levels since the Great Recession, which further underscores the financial difficulties faced by lower-income Americans. The rise in delinquencies among subprime borrowers signals that many are struggling to manage car payments amid increased costs not just from loans but also from rising car insurance premiums and general price inflation.
The situation reflects a broader K-shaped economic recovery in the U.S., where wealthier households, with stronger credit and financial cushions, continue to buy and finance vehicles comfortably, while those with lower incomes face increasing hardship. Prime borrowers, those with better credit scores, exhibit much lower delinquency rates of under 0.5%, despite some uptick. This contrast highlights the uneven impact of economic pressures across different segments of the population, with lower-income families notably more vulnerable to disruptions in employment and inflationary costs.
Last year, many borrowers also faced renewed financial challenges as paused student loan payments resumed, potentially pushing some into lower credit tiers and making car loans even harder to afford. The combination of persistent inflation, a less than robust job market recovery, and higher borrowing costs paints a challenging picture for many Americans relying on vehicles for essential transportation in their daily lives.
Overall, the rising rate of missed car loan payments among lower-income Americans reveals a significant strain beneath the surface of a generally stable U.S. economy. While the stock market and corporate earnings may appear robust, the financial realities of millions of car owners show growing signs of stress, suggesting potential difficulties ahead if inflation stays elevated or the job market weakens further.Â
