Americans are drowning in auto debt, and the fallout is finally showing up in the numbers. Delinquencies on car loans have hit multiple record highs in 2025, with borrowers across the country falling behind… fast.
According to data from Caribou and the Consumer Federation of America, U.S. consumers now owe $1.66 trillion in auto loans, second only to mortgages.
19.3% of borrowers now pay $1,000 or more per month for their car notes, a number that’s four times higher than it was in 2019. Those who can’t keep up are being swallowed by repossession companies. So far this year, 2.2 million cars have been taken back, the most since the 2008 Great Recession.
Fed rate cuts offer little relief as refinancing narrows
After the Federal Reserve cut interest rates in September and October, many Americans hoped it would give them room to breathe since lower rates historically often trickle down into auto loan interest rates, making refinancing a possibility.
Back in January 2025, the average auto refinance rate sat at 8.35%, but by September, it had dropped to 7.62%, according to Caribou. That dip helped reduce monthly payments by an average of $157, based on a 3.82% drop in rates for those who locked in a refi during that window.
But that window’s not open for everyone, and the credit bar for new auto loans is steadily rising, and borrowers with subprime credit scores are getting boxed out. Experian’s State of the Automotive Finance Market shows rising interest for those with poor credit, and fewer approvals overall, meaning the gap between those who can refinance and those who can’t is growing very fast.
While loan trouble brews, prices on new vehicles keep climbing. According to Santander Bank, nearly half of middle-income Americans delayed buying a car over the past year because they simply couldn’t afford it. But by April and early May, that built-up demand came roaring back.
Meanwhile, Kelley Blue Book reported that the average new vehicle cost $48,699 in May, a 2.5% increase from March, and more than double the usual bump seen from April’s tax refund-driven sales, which usually bring just 1.1% increases.
Buyers with cash or strong credit jumped at the chance, but most are left hunting for pre-tariff 2024 and 2025 models that haven’t been sold yet. Others are waiting for Labor Day or Memorial Day promos, hoping dealers will cut them a break.
Despite the mess, shoppers are still trying to find a way in. People with less-than-perfect credit are chasing “bad credit” auto loans or looking into alternative lenders. Some are checking with credit unions, others are hitting up buy-here-pay-here lots.
But high rates aren’t going away yet. Even with the Fed’s benchmark range down to 3.75%–4.00%, the reality is simple: if your credit isn’t strong, the system isn’t built for you.
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