Rising costs, interest rates push car payments into crisis mode in U.S.

Americans are struggling to keep up with their car payments at the highest rate in more than 30 years. Recent data from Fitch Ratings reveals that 6.56% of subprime auto borrowers were at least 60 days past due on their loans in January, the highest level since the agency began tracking such information in 1994.

This surge in late payments highlights the financial pressures many Americans are facing, with rising car prices and high interest rates contributing to the problem. For many, the dream of owning a car has become an increasingly difficult burden, with monthly payments climbing significantly.

“High car prices combined with increased interest rates have made monthly payments more burdensome for consumers, affecting borrowers across all credit score levels,” said researchers from the Federal Reserve Bank of New York. The pressure is mounting, especially as car prices have surged more than $10,000 since the pandemic, from an average of $38,000 in January 2020 to $48,500 in January 2025.

The situation is even more alarming for subprime borrowers, who are seeing a significant increase in payment delinquencies. These borrowers, typically with credit scores of 640 or lower, are being hit the hardest. Many are struggling to stay afloat as the cost of buying a new car and the accompanying loan payments have spiked.

The issue is not limited to low-credit borrowers. The latest report from the Federal Reserve found that the share of auto loans transitioning into serious delinquency; loans that are 90 or more days overdue, rose to 3% in the fourth quarter of 2024. This was the highest level since 2010, underscoring the financial strain across the board.

Automakers have also been affected by the rising costs. President Donald Trump’s proposed tariffs could increase car prices by as much as $12,000, further complicating the financial landscape. This would add more strain to consumers, particularly those who are already struggling to keep up with high car prices and loan payments.

While prime borrowers (those with higher credit scores) are experiencing fewer delinquencies, they are not immune to the economic pressures. Fitch reported that 0.39% of prime borrowers were 60 days or more behind on their car payments in January, a slight increase from 0.35% a year ago. The financial strain is clear across the market, and the ongoing pressures show no signs of easing.

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