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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.
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>> Delinquencies as a recession signal: Rising default rates among lower-income borrowers often show stress before it hits the broader market.
I’ll bet a significant number of these are “No puedo ir a trabajar por la inmigración.” ;-)
I will hazard a guess that they cannot qualify for financing due to their lack of paperwork, and usually buy cash out.
That car dealer that went bankrupt recently (don’t remember their business name) had a reputation for building their business on making loans to illegals.
Tricolor ...
Well in spite of many claims People and I mean US Citizens are hurting economically. Not from inflation now so much as the buying power going in the crapper...The US Dollar is collapsing and doesn’t have the buying power it did even a year ago.
You’re obsessed with statistics and graphs. You’re Karl Rove aren’t you mister Bushite
I bet you didn’t vote for Trump. So who did you cast a vote for?
Mister I have voted for Trump every time, donated cash to him each time so drop the True Believer crap...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.
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.
To get to the root of the problem you only have to look back a few years. A simple search of these three words will show who caused this looming disaster. Search: Cash For Clunkers
RE: You’re obsessed with statistics and graphs. You’re Karl Rove aren’t you mister Bushite
If voting for Bush over Gore and Kerry makes me a Bushite, I plead guilty.
But then, I also voted for Trump, THREE TIMES. What does that make me?
Is a new car really worth $45,000 + gas + insurance? Not for me, but enough people are willing to go broke for a car that the price stays there.
I’m 72 and. Going bankrupt. The stress is killing me. I’m in the hospital tonight ,No. family. No friends to stand bedside. Pray for me.
Will pray for you and you are not alone as I watch the Bankruptcies filed in State and many are going bankrupt...
Prayers up for you.
A recent article I’ve read says 66% of new car loans are 72 months or more. That is how they can “afford” them..
>> Tricolor ...
Yes!!! Thank you.
(by the way, that name Tricolor is racis...) :-)
>> Pray for me.
Prayers up, FRiend.
THE AVERAGE PRICE OF NEW CAR IN USA HAS HIT $50,000.
THEN-—YOU FIND OUT THE “BATTERY” IS UNDER A SEAT (OR IN FRONT OF THE FRONT TIRE)-—CANNOT ACCESS FOR A JUMP START FROM ANOTHER VEHICLE. ALSO-—HOW DO YOU CHECK THE BATTERY FLUIDS????
THE HEADLIGHT BULB—THE SIZE OF YOUR INDEX FINGER-—AND COSTING $50 & MORE IS PLACED SUCH THAT THE CAR HAS TO GO TO THE DEALER: WHY???
BECAUSE TO CHANGE THAT BULB-—YOU MUST REMOVE & REPLACE THE FENDER : AT LABOR PRICES HOVERING AROUND $150 +++ AN HOUR.
I AM NOT KIDDING—KIA & HYUNDAI....
YOUR TIRES HAVE ‘PRESSURE SENSORS” IN THEM——AND OTHER SUCH ITEMS THAT CAN HALT THE CAR ANYWHERE AT ANY TIME & LEAVE YOU STRANDED.
THANK YOU-—BUT NO THANKS:
I CAN SEE VISUALLY IF I HAVE A TIRE ISSUE. I ALSO HAVE A PRESSURE GAUGE—PROBABLY COST AROUND $20—A READABLE CIRCULAR GAUGE TYPE-—NOT A “STICK TYPE”-—WORKS FINE.
I CAN CHECK & REFILL MY BATTERY AS NEEDED
I CAN CHECK OTHER FLUIDS JUST AS EASILY
I DO NOT NEED HEATED SEATS OR STEERING WHEEL
I DO NOT NEED BACK UP CAMERAS—AND I CAN BACK UP TO HITCH UP MY 4 HORSE TRAILER JUST FINE., THANK YOU.
MOST OF ALL, I DO NOT NEED TO SPEND $50,000 OR MORE FOR A CAR THAT SEEMS TO REQUIRE THE SKILLS OF A JET FIGHTER PILOT TO OPERATE.
HAVE OWNED MY OWN CARS SINCE AGE 18-—AND INCLUDING ALL THOSE CARS PLUS A 2 HORSE TRAILER & A 4 HORSE TRAILER-—I DO NOT THINK I HAVE SPENT A TOTAL OF $50,000....4 HORSE TRAILER WAS CUSTOM BUILT & BRAND NEW & WAS ABOUT $10,000. MOST EXPENSIVE VEHICLE WAS USED 1 TON TRUCK FOR $4000. NEXT== BRAND NEW 1965 PONTIAC WAGON WAS $3434 OUT THE DOOR AT SCOTT ROBINSON PONTIAC IN TORRANCE, CALIF. STILL DRIVING 1979 BUICK I BOUGHT USED IN 1981 FOR $3500.
DON’T EVEN GET ME STARTED ON REGISTRATION COSTS & INSURANCE-—ESPECIALLY WITH SO MANY UNINSURED DRIVER’S EVERYWHERE WHO CANNOT READ OR SPEAK ENGLISH WHO ARE DRIVING.
NO WONDER CAR LOANS ARE FALLING BEHIND...
MY LAST CAR PAYMENT WAS AUGUST 1984...AND I DO NOT MISS THEM.
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