Posted on 10/18/2025 8:51:37 PM PDT by SeekAndFind
One of the key engines of the U.S. economy is starting to misfire and it’s happening in auto lending. Since the pandemic, car buyers have faced a costly mix: record sticker prices, shrinking dealer incentives, and higher borrowing costs. To make car ownership possible, more Americans, especially lower-income households, have turned to used vehicles and stretched loans out over longer terms.
Now, the strain is showing. Delinquencies are rising, repossessions are climbing, and subprime borrowers are feeling the squeeze as wages stagnate and unemployment edges higher. On the surface, the economy still looks strong, but the auto market is one of the clearest signs that many households are hitting their breaking point.
Consumers with lower credit scores are increasingly struggling to stay current on their loans:
Repossession activity tells the same story. Roughly 1.73 million vehicles were repossessed last year, the most since 2009, according to Cox Automotive. While repossessions have since leveled off, they remain well above pre-pandemic levels.
“These are borrowers who may have stretched their budgets to afford a higher price of the asset, as well as a higher payment because of the interest rate,” said Joelle Scally, economic policy adviser at the Federal Reserve Bank of New York.
The financial stress became especially visible last month with the bankruptcy of Tricolor Holdings, a lender that held roughly 100,000 active auto loans and catered to consumers with limited or no credit history—including undocumented immigrants and people without Social Security numbers.
The company is also facing fraud allegations involving its dealings with banks. A trustee has hired an outside adviser to investigate.
Tricolor’s failure prompted analysts at S&P Global Ratings to warn investors about certain securities backed by loans to borrowers with no established credit profiles—especially against the backdrop of stricter immigration enforcement.
Industry experts, however, say the Tricolor collapse appears to be an exception rather than a systemic trigger, at least for now.
Subprime loans still make up a relatively small share of total auto financing across banks, credit unions, and captive finance divisions.
However, automakers have recently loosened credit standards, according to Cox Automotive, signaling a willingness to chase volume even if it means taking on more risk.
Despite rising delinquencies, bond investors haven’t flinched. Yields on securities backed by subprime auto loans remain relatively low, reflecting confidence that tighter underwriting over the last few years will limit further fallout.
“Investors are willing to buy those bonds despite elevated delinquencies,” said Theresa O’Neill, an asset-backed securities strategist at Bank of America.
Even as inflation cools elsewhere, new cars remain expensive—and that’s pressuring budgets across the board.
That strategy is sending more would-be new-car buyers to the used market.
Ford, for example, recently announced plans to offer lower interest rates to buyers with weaker credit to help unload unsold F-150 pickups, its best-selling model. Even so, the company says only 3% to 4% of its loans involve higher-risk customers.
At General Motors’ credit arm, around 12% of loans this year have gone to borrowers with FICO scores below 620.
Lenders are tightrope-walking between demand and default risk. At Consumer Portfolio Services—a major subprime auto financer—repossession volume has surged. The value of loans ending in repossession has more than doubled since 2022, reaching nearly $98 million in Q2 of this year.
“The customer is constrained and under pressure,” said company president and COO Michael Lavin. The firm has already pulled back on issuing new loans.
Americans need cars to get to work, take care of families, and participate in daily life. When financing becomes unaffordable, it exposes deeper cracks in the consumer economy.
Here’s what investors and observers should watch:
✅ Delinquencies as a recession signal: Rising default rates among lower-income borrowers often show stress before it hits the broader market.
✅ Risk appetite on Wall Street: Continued demand for subprime auto loan securities suggests investors still believe defaults will be contained—but that could change quickly.
✅ Automaker strategies: If sales slow and repossessions rise, automakers may face pressure to reintroduce incentives or ramp up lower-cost models.
✅ Household strain: High payments and rising unemployment could pull more middle-income consumers into delinquency territory sooner than expected.
For now, Wall Street may not be panicking but Main Street is already feeling the pain. And history shows that when the auto market starts misfiring, the rest of the economy is rarely far behind.
MY HOUSE PAYMENTS PITI—WERE AROUND $165 ON FIRST HOUSE & AROUND $640 PITI ON 5 ACRES WITH LOG HOUSE ON 2ND PROPERTY. BOUGHT 3RD PROPERTY FOR CASH......
TOTALLY CORRECT-—ALONG WITH CLOSING HUNDREDS OF CAR DEALERSHIPS-—ESPECIALLY RURAL TOWNS
ASK YOURSELF WHY AN OIL CHANGE IN A TOYOTA TRUCK IS SO EXPENSIVE——AND OTHER VEHICLES-—THE FILTER IS IMPOSSIBLE TO GET TO.
CAN CHANGE MY OWN OIL IN MY “OLD IRON” & THE TOTAL COST OF FILTER & 6 QUARTS OF OIL==ABOUT $45.
NOT ROCKET SCIENCE
I hear ya
My situation is quite similar; in MANY ways to yours
I’ve been in survival mode for a long, long time now 😯😧
A very recent financial blessing helped a lot
Praise be to the Lord God
Still praying for a Joseph-type miracle
Prayers up for you ✝️✝️🙏🙏🛐🛐
I have not had a car payment in decades. I buy used when i do buy, paying cash. I drive ‘em untill there is nothing much left, always keeping the wife driving the nicest one we have. She is in a 2013 buick SUV. I drive a 1997 ford ranger. My annual registration is $70.00. i love dirt cheep.
Thank you for posting this.
People are foolish for buying brand new cars. I only buy old used cars and pay as close to cash as possible. To get reliable cars in that circumstance I only buy old used Hondas or Toyotas and screw everything else. Last car I bought was 6 years ago and only paid north of $13K which is the most I have spent on any car in 35 years.
Foolish person chiming in. Someone has to buy new cars to feed the used car pipeline. I traded my 16 year old car when the all wheel drive pump failed and a replacement wasn't readily available. I could have bought a rebuilt one, but this signaled me it was time to get rid of it since it was my primary car.
“HAVE OWNED MY OWN CARS SINCE AGE 18”
Late bloomer, eh?
(teasing)
That is, until my wife retired and I quasi-retired and we started driving a lot more. Now that we put 25K to 27K miles per year on just one of our 2 cars, the gas savings is worth getting a new, or at least a new-ish, car to get a high mpg. And with the interest rate at a fixed 2.85% (a few years ago), I couldn’t pass up the opportunity to leave the cash growing in my Roth IRA tax free and making payments from it.
In our case, the new car is an EV to really save on gas. But I wouldn’t get one unless you really do your homework on settling up charging at home (which is where the gas savings is), how much power rates are and the miles per kWh you get from your EV, the number of miles you drive, the availability of fast chargers along the road trips you usually take (assuming you’d rather take the new EV on most trips instead of the older gas car/truck since the new car is more comfortable), if you take a lot of trips up north in the winter (don’t call it “fast charging” if it’s bitter cold), etc. So far our road trips have been fine for the EV and we didn’t opt to take our old gas pickup instead. But I’m sure the day is coming when at least one trip will demand we take the gas pickup (aside from the ones we already took the pickup because the trip involved pickup chores).
But again I’m with you on nothing but old used cars and paying cash except for the few niche situations that a high driving frequency demands looking into reducing gas expenses.
Tricolor...heh heh.... mexicano speak for the mexican flag!
Some one built their business on the premise that the democrats would rule forever and the illegal aliens would always pay their bills!
I see some people driving Mercedes, BMW’s, Lexus etc that I know for a fact can’t afford them. It’s easy to get a new car
Sounds like the smart move is to buy a 3/4 ton truck with a wheel lift stealthily mounted to the back and go into the Repo business.
Was great for quick cash at the moment, but the piper still had to be paid, and all of us are paying for it now.
then again, state inspections are also keeping older cars off the road.
the roads are safer at a cost.
Duh - that's why they have lower credit scores. They are the people who should be buying a 20K 4-door sedan, not an 80K monster pick-up truck.
My neighbor drives a new Porsche which is totally out of line for our modest neighborhood. We accidentally received and opened a piece of her mail. It was a notice that she was a couple months behind in her house payments.
But yea, drive a Porsche.
It’s the Illegals… they are driving back to their home countries and stop paying their car loans. Tricolor Holdings went into Chapter Seven bankruptcy because it was lending to illegals.
Maybe not so much a warning sign for the economy.
More like a warning sign that people buying cars now have been supported by Mommy and Daddy forever. Now the parents are gone, and the adult children have no clue about responsibility, financial or otherwise.
There’s a reason that every time we take in our 2012 Honda Accord for regular checkups, all the men in the shop beg to buy it. I think there are 33K miles on it, and it looks brand new.
It’s our second car, and we’re keeping it.
The country is healing: A company that provided car loans to illegals just went belly up…
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