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Subprime Loans and Lenders Collapsing
Delinquency rates on subprime auto loans have hit record highs, reflecting mounting financial stress among lower-income Americans as high car prices and borrowing costs persist. Fitch Ratings reports that over 6% of subprime borrowers are at least 60 days past due—the highest level ever. Affordability remains a major issue, with J.D. Power noting that 14% of new-car buyers in September had credit scores below 650 and average monthly payments now exceed $750.
Repossession activity has surged, with 1.73 million vehicles repossessed last year, the most since 2009. Though delinquencies have recently leveled off, they remain well above pre-pandemic levels after years of easy credit and inflated vehicle prices. Automakers and lenders are proceeding cautiously—GM Financial says 12% of its loans went to borrowers with low credit scores, while Ford is offering discounted financing to move unsold inventory. Despite the stress, investor demand for subprime auto loan securities remains strong, reflecting confidence in tighter lending standards.
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Americans are falling behind on their car payments at alarming rates:
— The Kobeissi Letter (@KobeissiLetter) October 26, 2025
Subprime auto loan delinquency rates reached 6.43%, the 2nd-highest on record.
The 60-day delinquency rate for subprime auto loans has more than DOUBLED over the last 3 years.
Delinquency rates are now… pic.twitter.com/upYHNGcm83
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Auto loan balances have doubled over the past 12 years, with 6.6% of subprime borrowers now 60 days delinquent, the highest rate on record. Nationally, auto lenders hold $1.66 trillion in loans, 5% of which are over 90 days late. Rising car prices, averaging $50,000 for new vehicles, and steep borrowing rates, reaching up to 14% for used cars, have worsened affordability. Repossessions are now at their highest level since 2009, while major banks like Barclays and JPMorgan face mounting losses tied to credit stress. With car ownership vital for employment, many subprime borrowers are overextending financially, raising alarms of broader economic fallout.
This is why we're watching the Economic Activity Composite (EAC) in the Economy & Stock Report so closely. The economy, including stocks, could face substantial headwinds if EAC turns double negative.
Subprime auto borrowers with weaker credit scores are falling behind on payments at the fastest pace since the early 1990s. The 60-day delinquency rate has climbed above 6.4%, surpassing levels seen during the 2008 financial crisis, while repossessions have reached a 15-year-high, revealing growing strain on U.S. consumers.
The surge stems from a combination of rising car prices, higher interest rates, and soaring ownership costs like insurance, repairs, and fuel. Many borrowers took out long loans, often 72 to 84 months, and rolled existing debt into new ones, leaving them owing more than their cars are worth as used vehicle prices cooled. Slower wage growth, reduced work hours, shrinking savings, and the return of student loan payments have further weakened household finances.
Auto delinquencies often signal early cracks in consumer health, since cars are among the last bills people stop paying. While this may not trigger a 2008-style collapse, it highlights a widening economic divide between higher- and lower-income households. Higher remains stable, while lower face mounting financial pressure. Everyone wonder why free for all is so popular in the New York mayoral race? Car sales and manufacturing may slow, pointing to broader weakness beneath the surface of headline economic strength as credit tightens.
Years ago we said get ready for the economic shit show. You're living and watching it unfold in 2025. 2026 will be next level.
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The Matrix provides market-driven trend, cycles, and intermarket analysis.
