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.
Thanks!
“The problem is the Dollar is dying and not much is coming from the White House to help that as it seems President Trump is not listening.”
That problem was baked in long before Trump became president and he can’t turn dials and resolve it. The only way is to grow the economy, which is his main effort. A thirty-two trillion dollar debt now is devestating; double the size of the economy and not so much.
We will pray for you. You have some FRiends who really do understand here.
Put it in God’s hands and pray for strength.
“I’ll bet a significant number of these are “No puedo ir a trabajar por la inmigración.” ;-)”
Bingo!
My ‘98 beater died a few weeks ago and we’ve been looking. Buy the wife a new car and take her paid off for mine? Buy a late model used ? An older used? Drop a crate engine in the heater? Didn’t matter much when I ran into the sales guys. The customer is not in charge. The customer has long since handed power to the dealers by caring about nothing but the MONTHLY nut since, probably, the last twenty years. I was amazed to find that everywhere I went the quoted price jumped by 2000.00 Ididnt finance thru them or if I paid cash. Since that looked to me like a middle finger in my face it’s gonna be crate engine or a 3000.00 ‘dollar ‘09 beater my mechanic put me on to. Here’s where the car sales industry is, putting a fully rebuilt engine into my ‘98 Fbird AND a fully rebuilt engine into my ‘02 work truck simultaneously would cost far less in the short and long term than buying a reasonable used car.
Here’s the thing, I don’t have to run out and replace my beater any time soon. So I don’t have that gun to my head. They’d have me by the nuts at a dealership if that were the case. Thats the position a lot of people are in when a car dies. I don’t want to play and I’m not gonna.
Refusals to pay are not the same as the inability to pay. Obviously, a refusal to pay would not be in “good faith” while being truly unable to pay could be.
I’d like to know what percentage of chronically delinquent accounts are approved for borrowers who eventually refuse to pay when they really can. That percentage should include student loan accounts where the borrower fits the same general profile.
One of my favorite cable shows was Airplane Repo, where a financial institution hires a team to legally “steal” airplanes, business jets, choppers and boats from rich deadbeats who refused to pay their bills. I think there might’ve been one deadbeat who agreed to the terms of repossession without objection, but it was he who decided to let it go to that extreme in the first place.
Student loan deadbeats have nothing to repossess, do they? Collateral is not required to qualify for student loans or is it? In some cases, garnishment of wages to repay student loans is possible. For private student loans, a lender must sue the responsible party and receive a court judgment before garnishing wages.
Whether it’s a home (or home improvement), aircraft, automobile, motorcycle, boat or a student loan, there should be additional consequences for borrowers who exhibit a pattern of outright refusal to pay. Let them have their day in court, but if they can afford to hire an attorney, then the defendant should be heavily scrutinized.
These deadbeats fit the same profile as bail jumpers to a certain extent, and if it ever came to a vote, I would be saying YES to Federal debtor prison(s).
Millions of Americans Are Falling Behind on Car Payments.
Not a economy issue more of bad decision making and not knowing you ability to pay for things.
Urges 1
Reality 0
Prayers sent.
I have no clue, but I will say this. I spent a couple of summers in the collections department of a bank over 45 years ago. Some of the movers and shakers in town were deadbeats in sense they didn't pay their bills on time. Pressed enough they would cough up the money. My job was to call them and remind them they were past due. When that didn't work, it got kicked up to the loan boss and beyond.
So sorry. Prayers.
Prayers up
Most people don’t see the coming collapse of civilization. All the signs are screaming that loudly these days.
Where did you get your ASR-33? I can’t find one.
I buy new cars and pay cash. That way I know the vehicle hasn’t been redden hard and poorly maintained.
Breaks my heart reading this. May God give you peace today.
This is what happens when you sell $75,000 vehicles to people who can’t afford them.
Very true but President Trump needs to break the cycle and fire up Congress how ever he can to work on the issue.
“Tricolor” = Mexican flag
i can’t believe i never made that association! ... and it would seem the big-wig CEOs of the major banks and hedge funds never made that association either ...
i suppose one alternative is that they DID make the association, and as you said, bought into the premise that the democrats would rule forever and illegal aliens would always pay their bills, which to me is even more far-fetched! ...
i suppose another possibility is that they agreed to lose hundreds of millions of dollars because they were extorted by the fascist “biden” administration to make loans to illegal aliens, possibly expecting to be bailed out by the kamala administration ...
regardless, they thought wrong ...
Stand by for Cash for Clunkers II
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