Auto loan delinquencies soar to highest level in decades
Americans with low credit scores are increasingly falling behind on their car payments, underscoring the growing financial stress across the U.S. economy.
cheddar
- Rising new car prices are causing Americans to take out auto loans for six years or longer.
- With these long-term loans, buyers end up paying thousands more in interest over the life of the loan.
- New Mexico has the highest percentage of borrowers with auto loans for six years or longer.
With new car prices hovering around $50,000, Americans are taking out longer-term car loans than ever before, paying thousands of dollars in interest on top of an already expensive car.
According to Cox Automotive’s Kelley Blue Book, the average price of a new car in March was $49,275, up 3.5% from the same month last year.
Car buyers are opting for longer-term auto loans in response to rising sticker prices. A new Lending Tree poll found that 34.9% of U.S. borrowers hold auto loans for six years or longer. Research shows that these car buyers pay an average of $8,750 more in interest over the life of their loan.
“Cars continue to get more expensive,” Matt Schultz, LendingTree’s chief consumer finance analyst, said in a statement.
“Many people need to stretch out the payoff period to keep their monthly payments manageably low,” Schultz added, which is a problem “especially since cars tend to depreciate in value very quickly.”
Which states have the highest percentage of borrowers with long-term auto loans?
According to Lending Tree, New Mexico leads all states with 45.8% of borrowers holding auto loans for six years or more.
The top five states with the highest percentage of auto loans over six years are:
1. New Mexico
- Percentage of borrowers with loans longer than 6 years: 45.8%
- Estimated average interest for loans over 6 years: $14,811
- Estimated average interest for loans under 6 years: $8,570
- Difference: $6,311
2. Alaska
- Percentage of borrowers with loans longer than 6 years: 44.9%
- Estimated average interest for loans over 6 years: $15,150
- Average estimated interest for loans under 6 years: $6,534
- Difference: $8,625
3. West Virginia
- Percentage of borrowers with loans longer than 6 years: 43.7%
- Estimated average interest for loans over 6 years: $13,158
- Average estimated interest for loans under 6 years: $8,044
- Difference: $5,114
4. Arizona
- Percentage of borrowers with loans longer than 6 years: 41.4%
- Estimated average interest for loans over 6 years: $13,492
- Average estimated interest for loans under 6 years: $7,939
- Difference: $5,553
5. Louisiana
- Percentage of borrowers with loans longer than 6 years: 41%
- Estimated average interest for loans over 6 years: $14,288
- Average estimated interest for loans under 6 years: $8,946
- Difference: $5,342
How many car owners are behind on their loans and what are the downsides?
According to Edmunds.com, nearly 30% of recent new car buyers were behind on their trade-in loan.
The group said 29.3% of trade-in values used to buy new cars were underwater in the fourth quarter of 2025, meaning owners owed more on their existing cars than they were worth at the time of trade-in. Mr Edmunds said the figure represented the highest share of underwater car buyers recorded by the company since the first quarter of 2021, when the group announced that 31.9% of trade-ins had negative trade-in capital.
Edmunds.com said the data “underscores how negative equity tends to become a cycle that is difficult to break out of.”
“While debt rollovers may provide short-term relief, they often leave buyers with higher payments and fewer options the next time they enter the market,” the group said.
Edmunds offered the following tips to avoid that cycle.
- Understand how much your vehicle is worth relative to the amount you owe
- Choose purchases that maintain value and meet long-term needs
- Recognize that focusing only on monthly payments can obscure the true cost of your purchase
