Nearly 7 percent of Americans with subprime credit scores are now at least 60 days behind on their car payments, a level of distress not recorded in more than three decades. The Federal Reserve published new analysis on November 24, 2025, using the FRBNY Consumer Credit Panel and Equifax credit records, showing that auto-loan delinquency among subprime borrowers hit 6.9 percent through the third quarter of 2025. That figure marks the worst reading since the early 1990s and signals that payment stress is concentrated among lower-income households rather than spreading evenly across the consumer credit spectrum.
Subprime auto delinquency at 6.9 percent and climbing
The 6.9 percent delinquency rate does not exist in a vacuum. Federal Reserve economists tied the spike directly to higher monthly payments and larger amounts financed, a combination driven by elevated vehicle prices and interest rates that have pushed borrowers into longer, more expensive loans. For a subprime buyer financing a used sedan at double-digit rates, the arithmetic is punishing: a $30,000 loan at 14 percent interest can produce a monthly obligation north of $700 over six years, leaving little margin for any income disruption.
The strain shows up most clearly in the gap between subprime and prime borrowers. The Fed’s accessible data tables, which break delinquency rates by credit score bands and income level, confirm that near-prime borrowers are also falling behind at rising rates, though not at the same pace. Prime borrowers, by contrast, remain far closer to pre-pandemic norms. The divergence suggests that the problem is not broad consumer weakness but a targeted squeeze on households that entered the post-pandemic car market with the thinnest financial cushions.
One hypothesis worth tracking: if used-vehicle prices fall meaningfully below their 2023 peak, subprime delinquency rates could decline faster than prime rates, narrowing the gap visible in the Fed’s panel data. Lower sticker prices would reduce the amount financed and, by extension, the monthly burden that the Fed’s own analysis identifies as the primary driver of missed payments. A decline in interest rates would amplify that relief by lowering the cost of new loans and, for some borrowers, refinancings. Whether that narrowing materializes should be testable in the 2026 second-quarter Equifax panel release. For now, the trend line points in the wrong direction.
Fed data links payment size to record missed payments
The Federal Reserve’s FEDS Notes series provides the clearest public accounting of what is going wrong. The November 2025 note on consumer delinquency dynamics draws on the FRBNY Consumer Credit Panel, a nationally representative sample of Equifax credit records, and tracks auto-loan performance through 2025’s third quarter. It establishes formal definitions for subprime, near-prime, and prime credit-score bins, giving the 6.9 percent figure a consistent measurement framework rather than leaving it to private-sector estimates with varying methodologies.
A separate September 2024 FEDS Note built the causal case. That earlier analysis documented how rising interest rates and vehicle prices translated into higher monthly payments, which in turn raised the probability that borrowers would fall at least 60 days behind. The authors found that, holding borrower characteristics constant, a larger required payment relative to income was strongly associated with subsequent delinquency. In other words, the payment shock itself-rather than a sudden deterioration in credit quality-emerged as the main channel through which macroeconomic conditions were pushing more auto loans into trouble.
The November 2025 update extends that logic into a period when vehicle prices have cooled somewhat but borrowing costs remain elevated. It shows that, for many subprime and near-prime borrowers, the combination of high loan balances and still-steep interest rates has locked in large monthly bills that are difficult to escape. Even as inflation has eased from its peak, wage growth for lower-income households has not been sufficient to offset the jump in transportation costs. The result is a widening gap between the share of subprime borrowers who are current on their auto loans and the much steadier performance among prime borrowers.
Those patterns matter because auto loans are both essential and hard to shed. For many workers, especially outside major transit hubs, a car is a prerequisite for earning a paycheck. That makes auto payments among the last bills most households are willing to skip, behind only rent or mortgage obligations. When delinquency rates rise to multi-decade highs in such a priority category, it signals that a meaningful slice of the population has exhausted easier forms of belt-tightening-cutting discretionary spending, drawing down savings, or juggling smaller debts-and is now struggling to maintain even core financial commitments.
Still, the Fed’s researchers stop short of declaring a systemic crisis. Overall auto-loan delinquency, including prime borrowers, remains below the peaks seen during the Great Recession, and banks and finance companies have tightened underwriting standards compared with the most aggressive pre-2008 practices. The concern is more targeted: a persistent pocket of stress among borrowers with limited buffers, whose financial fragility could amplify any future downturn. If labor markets soften or interest rates stay higher for longer than markets expect, the current 6.9 percent subprime delinquency rate could prove to be a floor rather than a ceiling.
For policymakers, the emerging picture poses a familiar trade-off. Efforts to cool inflation through higher interest rates have contributed to the payment pressures now visible in the auto-loan data, particularly for households that borrowed late in the tightening cycle. At the same time, prematurely easing policy risks reigniting price increases that would erode real wages and potentially worsen affordability in the long run. The Fed’s own notes do not prescribe a solution, but by quantifying the link between payment size and distress, they sharpen the stakes of decisions that will determine whether the current wave of auto-loan trouble crests or continues to build.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
