More Americans Falling Behind on Car Payments as Auto Loan Delinquencies Rise
New reports for Q1 2025 show 5.1% of Americans with auto loans are behind on payments, driven by inflation, higher interest rates and renewed student loan obligations — pressures concentrated in Southern states and among younger borrowers.
- Delinquency rate: 5.1% of borrowers were delinquent on at least one auto loan in Q1 2025, per LendingTree: Auto Loan Delinquency Rates Study.
- Generation gap: Gen Z 7.5%, Millennials 6.9%, Gen X 4.3%, Baby Boomers 1.9%, according to LendingTree.
- State range: Delinquencies range from ~3.2% up to 9.8% in Mississippi — see LendingTree.
- Credit pressure: Average VantageScore fell to 701 in early 2025, per VantageScore.
Rising trend: auto loan delinquencies climb
Auto loan delinquencies have been edging up for years and reached a worrying level in early 2025. LendingTree reported that 5.1% of Americans with auto loans were delinquent on at least one account in Q1 2025. That national figure masks wide state-by-state differences, with the highest rates concentrated in Southern states such as Mississippi (9.8%), Louisiana (8.4%) and Georgia (7.8%).
Who is most affected
Younger borrowers are carrying a heavier share of the burden. Gen Z borrowers show the highest delinquency rate at 7.5%, followed by millennials at 6.9%. While subprime borrowers remain vulnerable, higher delinquency rates are appearing across many credit profiles.
- Delinquency stages: 30 days late — 2.0%; 60 days late — 0.9%; 90–120 days late — 0.9% (LendingTree).
- Monthly payments: National average $751; Texas average $867 (LendingTree).
Why this is happening: debt, prices and tight budgets
Several forces are combining to push more households into car payment trouble. Average auto loan balances rose by more than $400 in the past year, raising monthly bills for many borrowers. VantageScore links the drop in average credit scores to the twin pressures of rising auto loans and the return of student loan payments.
Persistent inflation, higher interest rates and slow wage growth mean that even with low unemployment, day-to-day costs for housing, food and fuel leave little room for surprise bills. In rural areas — where a car is often essential — the impact is especially acute.
Loan balances and borrowing patterns
LendingTree’s data suggest a slight drop in overall auto loan originations even as delinquencies rise, indicating lenders may be tightening or fewer consumers are taking on new loans. Still, average loan sizes and monthly payments remain high and push more households toward late payments.
Repossession risk and wider fallout
“When a vehicle is taken back, families lose a key asset that often keeps them employed and connected to their communities.”
Longer delinquencies increase the risk of repossession, which can have cascading effects: lost employment, reduced access to services and additional strain on local economies. Local dealers, lenders and used-car markets may feel the impact, particularly in small towns and rural counties.
Expert voices
Matt Schulz, LendingTree’s chief consumer finance analyst, said car payments are usually a high priority because vehicles are necessary for work and daily life. He noted the rise in delinquencies is a sign of deeper economic pressures rather than a lack of will to pay.
Susan Fahy of VantageScore highlighted the drop in average credit scores and tied the decline to growing auto loan and student debt burdens, which are beginning to show up in credit metrics.
Broader context: not just a short-term spike
This trend is part of a longer-term increase: reporting shows auto loan delinquencies have climbed more than 50% over the past 15 years. The pandemic brought a brief pause when relief measures eased some pressures, but the longer-term direction remains upward (AOL reporting).
Implications for the United States
Rising auto loan delinquencies add real strain to household budgets and can threaten jobs and access to essential services. States and regions with high delinquency rates may face sharper impacts on local lenders, used-car markets and repossession rates. For voters in affected areas, this may become a local political issue prompting calls for support and policy responses.
Practical steps for households and local leaders
- Borrowers: Contact lenders early to discuss payment plans or hardship options; consider credit counseling.
- Local leaders: Partner with banks, credit unions and nonprofits to expand counseling and short-term assistance; explore transportation supports for workers.
- Employers: Offer flexible scheduling or temporary transportation help when vehicle loss threatens employment.
Monitoring the wider economy
Economists and consumer advocates will keep watching auto loan delinquencies as an early signal of broader household strain. Continued increases could affect employment, consumer spending and credit markets, especially in the hardest-hit states and communities.
