A surge in subprime auto loan delinquencies, high-interest burdens and rising car ownership costs are pushing America's auto credit system toward a breaking point, with recent bankruptcies exposing deeper cracks in the financial underpinnings of this $1.56 trillion market.
Auto Loan Delinquencies Spike: The Cracks Are Visible
It's getting harder to ignore what's happening under the hood of America's auto credit system.
More than 6% of subprime auto loans were over 60 days delinquent in August 2025, according to Fitch Ratings. That's the highest level ever recorded, and it's a clear sign that many borrowers — often those with lower credit scores and limited financial buffers — are falling behind.
VantageScore's August CreditGauge report adds more troubling data. Delinquencies are up across all credit tiers, even among superprime borrowers (scores 781-850), where 90-119 days past due increased by more than 300% year-over-year.
Though default levels remain low in absolute terms for these consumers, the shift signals stress creeping into previously resilient parts of the economy.
Car Costs Are Rising — And So Are Monthly Payments
Car-related costs are also accelerating. The Consumer Price Index for motor vehicle maintenance and repair rose 8.5% year-over-year in August, pushing up the overall cost of car ownership.
Add in sky-high car prices and rising borrowing costs – the average rate on a 72-month auto loan is 7.8% – and the squeeze becomes clear.
According to Experian, over 50% of new car leases and 75% of new car loans in the second quarter of 2025 required monthly payments of at least $500, with 17% exceeding $1,000.
Used car buyers are also squeezed — 46% of used auto loans now involve monthly payments above $500.
Bankruptcies Bring Credit Market Risk Into View
Then came the bankruptcies. First was Tricolor Holdings, a lender focused on underserved communities. On Sept. 10, it filed for Chapter 7 liquidation, leaving behind over 25,000 creditors and causing losses across the financial sector. Fifth Third Bank (NASDAQ:FITB) reported a $170 million impairment tied to Tricolor's collapse.
Just weeks later, First Brands Group, a well-known auto parts maker, filed for Chapter 11 bankruptcy, weighed down by up to $50 billion in liabilities and opaque off-balance-sheet financing.
The $1.56 Trillion Question: How Big Is The Auto Loan Risk?
On the surface, banks hold $496 billion in auto loans, according to data from the Federal Reserve.
But when you count securitized auto debt — much of it held by non-bank lenders, hedge funds and asset managers — the total soars to $1.56 trillion as of June 2025.
That's a lot of credit exposed to rising defaults and falling recovery rates.
What Stocks Could Be At Risk?
Stocks tied to auto lending and used-car sales could feel the heat if credit conditions continue to deteriorate. Among the names under close watch:
- Credit Acceptance Corp. (NASDAQ:CACC)
- Carvana Co. (NYSE:CVNA)
- CarMax Inc. (NYSE:KMX)
- AutoNation Inc. (NYSE:AN)
- Asbury Automotive Group Inc. (NYSE:ABG)
- Group 1 Automotive Inc. (NYSE:GPI)
- Sonic Automotive Inc. (NYSE:SAH)
- Ally Financial Inc. (NYSE:ALLY)
- O’Reilly Automotive Inc. (NASDAQ:ORLY)
Whether the market is heading for a broader credit event remains to be seen. But between surging defaults, growing monthly burdens and billion-dollar bankruptcies, one thing is certain: the road ahead looks increasingly treacherous.
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