A new study shows that as car prices rise and interest rates increase, the delinquency rate of auto loans in the United States has soared by over 50% in the past 15 years. What was once considered one of the safest consumer credit products has now become one of the riskiest credit sectors.
Data from credit scoring company VantageScore indicates that consumers across almost all income levels are now facing monthly pressure from car loans. Since 2010, the delinquency rate of auto loans has significantly increased, with the average loan balance skyrocketing by 57%, surpassing all other types of credit.
Rikard Bandebo, Chief Economist at VantageScore, points out that the cost of cars themselves and related ownership expenses have been rapidly rising, particularly more pronounced in the past five years.
According to data from Cox Automotive, new car prices have risen by over 25% since 2019, with the average selling price now exceeding $50,000. Data from car research company Edmunds.com shows that the average monthly payment for a new car in the third quarter of this year reached $767, and one-fifth of borrowers are making monthly payments exceeding $1,000. Currently, the new car loan interest rate has exceeded 9%, exacerbating the affordability crisis in the auto market.
Bandebo describes this as a “double blow”: “Consumers not only face the impact of rising car prices, but also higher financing costs.”
The research indicates that no income group is completely immune. Since lenders tightened loan conditions for low-credit borrowers three years ago, borrowers with good credit have become the fastest-growing group in delinquent car loans. Bandebo explains, “The higher the income, the more likely people are to think they can afford more expensive cars.”
With American consumers continuing to favor expensive trucks and SUVs, the trend of delinquent auto loans may be difficult to reverse. Meanwhile, affordable car models introduced by car manufacturers are becoming increasingly scarce.
Erin Keating, a senior analyst at Cox Automotive, points out that the current new car market is mainly supported by wealthy families who can access funding and lower loan rates, thus preferring to buy higher-priced models. She also notes that while tariffs have added new cost pressures, the key driver is the increasing market share of high-end cars and electric vehicles, pushing up the average transaction price of new cars to unprecedented levels.
Keating gives the example of the top-selling vehicle in the U.S., the Ford pickup, often priced over $65,000, indicating the generally high prices in the new car market.
She believes that the current high-priced new car market may be nearing a turning point, with potential for cheaper options, new business models, or innovative ways of purchasing cars in the future. “This is the current market situation,” she says, “and this market is ripe for disruption.”