As economic stress spreads, car loan delinquency increases by 15 years
The rising defaults in car payments between both subprimes and key borrowers indicate an increased economic pressure on American consumers.
Money tells the news
According to a new report from consumer advocacy organizations, the cost of purchasing and maintaining cars, and maintaining cars identified by inflation and tariffs, leads to rising defaults and foreclosures on car loans and a potential crisis for American consumers not protected by the federal government.
The record number of defaults is the canary of coal mines for large-scale economic issues, the Consumer Federation (CFA) warned.
According to a CFA report that gave USA Today an exclusive first look, “delinquency, default and foreclosure have been radiating in recent years, and it appears to be surprisingly similar to the obvious trends before the Great Recession.”
What’s happening with default car loans?
According to a CFA report, cars are more expensive than ever. “Driving to default: the economy-wide risk of rising car loan delinquency.” The average vehicle sells for nearly $50,000, with almost 20% of new car buyers paying more than $1,000 a month, the report says. Nearly one in five new car buyers in the first quarter of 2025 will have a seven-year loan. The CFA said used cars also rose 6.3% year-on-year.
The CFA sent a report to members of Congress on September 10, calling for the end of “exploitative practices” that include interest rate kickbacks in which dealers and lenders “sneaky inflation interest rates and conspire to share profits collected from consumer overpayments.”
Americans are in over $1.66 trillion in car debt and a crisis. “The federal watchdogs in our country – Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) have taken considerable steps from overseeing and enforcing predatory practices in the automotive market,” the report states.
The CFPB did not respond to requests for comment due to publication deadlines. However, White House spokesman Kush Desai told USA Today: Americans every day by ultimately reducing interest rates. ”
Federal government and regulators should protect consumers, the report says
Some of the CFA’s concerns are what they call the intensity of the CFPB budget by Congress “despite recording record number of complaints about car loans.”
The organization also said “The FTC” has not filed a single case against car dealers since Trump set up new leadership, and the committee rejected the fifth Circuit Court of Appeals decision. Adding unnecessary items to the cost of the car, the report said.
In response to USA Today, an FTC spokesperson said it would not respond to the question of why the agency did not challenge the automobile rules, but said “some currently in the litigation have brought about strong enforcement measures designed to protect consumers in this area.”
Access to the vehicle is important for everyday consumers
The default on car loans shows overall consumer stress, “usually means that consumers have extended everything else they can do in their own home,” Erin Witte, CFA director of consumer protection and co-author of the report, told USA Today.
Auto buyers with above average credit scores (620-679) were twice as likely to be delayed before the pandemic, the report said. Borrowers ages 18-29 are more than 90 days behind on car loans faster than older borrowers.
Citing data from insights and outlook for the Cox Automotive market, the report states that its presence since 2009 was at the highest level, jumping an estimated 43% from 2022 to 2024.
The debt cycle can be disastrous for consumers
Consumers can fall into debt spirals when they can’t afford to pay for their car, Witte said.
That’s what happened to Erin Compton.
Rockford, Illinois, encountered mechanical problems with the 2014 Chrysler Model 200 for 95,000 miles shortly after its purchase in 2023. Compton failed to return the car to the dealership. She also had title issues with the car finance company.
Compton’s bill was added, including car repairs, and she missed two of her monthly payments of around $285. Her car was taken back, she had no way to go to work, and she lost her job and apartment. The car loan company is also suing her for $6,000.
“My story is complicated, but solutions can easily solve these continuous cycles of burden,” Compton told USA Today. “Our country is in a state of crisis not only because of the big ones, but also because of the everyday little things that are often overlooked by the highest and wealthy companies that don’t need to directly feel it.”
Compton is currently providing substitute education, but said he threw her into a homeless fight after losing her car in 2023. Two nights before Compton spoke to USA Today, she said she was sleeping in the car, but now she is temporarily staying with a friend.
Calling the government to protect consumers
Witte said that the Biden-appointed commissioner was removed by the Trump administration, resulting in politicization of federal agencies accused of protecting consumers.
Other consumer advocates agree that more protection is needed.
“When we go to car dealers, people are voiced in despair,” added Rosemary Shahan, the consumer president for reliability and safety, “the agency there has abandoned the consumers to protect us at the federal level.”
Betty Lin-Fisher is a consumer reporter for USA Today. Contact her at blinfisher @usatoday.com or follow her on X, Facebook, or Instagram @Blinfisher, @Blinfisher.bsky.social.. Sign up for the free The Daily Money Newsletter, including Fridays’ Consumer News.
