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.
Yes I predict in 5 years or less things are going to bring about a National divorce due to collapse of the economy. States breaking up into small nations.
i think they were selling $5,000 vehicles to people who couldn’t afford them, but charging $10,000 and high interest rates ...
We have no car payments. That said, we have a blown tranny (have fun with that one) in the Yukon Denali XL that will have it tarped and parked for the winter. Approximately $4K to fix that one unless someone has a L465E transmission they want to donate. Meanwhile, we have a fully functional 95 Nissan Pathfinder SE V6 and an 05 Chevy Trailblazer that will get us through the winter, January thaw, more winter and mud season.
Prayer for better times:
Fill my heart with unwavering faith and unwavering trust in Your unfailing promises.
Calm my anxious thoughts and replace them with a steadfast assurance that You are working all things together for my ultimate good.
Help me to surrender my fears and worries into Your mighty hands, finding solace in Your perfect timing.
Father, as I journey through these challenging times, remind me of Your unfailing love and faithfulness.
My daily is a ‘01 Camry.
Manual transmissions last forever.
Something has to happen. Hopefully it can be relatively bloodless.
I managed to kill one. Don’t get mad at something and then slam it into reverse while going 45.
> 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.
Smart.
President Trump is to distracted with the Middle East instead of Iowa or Kansas Citizens or any state for that matter as many people are struggling.
The reality is we need less govt and more struggling on our own with more freedom.
Never live beyond your means, I’ve always said.
Go to any inner-city hood and notice how nice the cars are.
Most people “wear” their cars as a fashion statement. Years ago the secretary where I worked was lamenting that her loan was 25% “but the car is so cute.”
The only reason I bought a “new” 1996 Camry is my last 25 year old suv broke a camshaft on I5 outside Portland. I want to get a truck for work but good lord, new trucks are darn near $60,000.
No Government needs to protect Citizens as the valuation of the Dollar is not something the Citizen can control or do anything about as it has been so mismanaged by the Government the Citizen doesn’t stand a chance.
Maybe the dollar is getting weaker. Also, maybe people are mentally retarded to have a car payment of over &750 per month. I make good money here in Alaska, and I would NEVER even think about paying that much a month for a car or truck. That is called “asking for it”. You’re stretching your resources thin, why? So you can show everyone you have some new wheels? Retarded!
People can make lots and lots of cuts and be fine. Online subscriptions? Gone! Going out to eat multiple times a week? Gone. Stopping for the coffee every morning? Gone. High speed internet? Gone. Now phone and phone plan? Gone!
So many things people piss money away on and act like they don’t know what to do. Retarded.
What was your fake name?
Mine was Michael Booth.
That was 30 years ago
Time flies...
?
Around 1995 i briefly worked at a collection agency.
For our safety and anonymity they assigned us fake names to use while talking to debtors.
Mine was Mike Booth.
I quickly realized that calling these people was a job that i was not suited for..
I don’t recall using a fake name. My job was mainly to call people behind on their payments and remind them they were late. If the conversation started to escalate, I would pass the call on to a regular full time employee. This was back in the late 70’s.
:)
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