New data says car loan defaults just hit the highest-ever recorded
In the subprime auto finance industry – and yes, the practice of issuing and managing high-interest car loans is a huge thing in the U.S. (and a mighty profitable one) – companies consider defaults, extensions, and repossessions “normal” and “expected.” However, industry experts express heightened alarm at the rapid rise of delinquencies. While even prime car loan customers are having trouble keeping up with their payments, the subprime arena looks much worse.
Subprime car loans in 60-day-plus delinquencies just hit an all-time high
According to S&P Global Mobility, in December, 60-day-plus delinquencies rose to 6.56% of all subprime car loans.
That’s the highest ever recorded.
Carvana, DriveTime, and Westlake Financial all top the list of entities managing the highest year-over-year increases in subprime defaults.
What’s more, institutions are starting to feel that repossessing the cars isn’t in their best interest. Instead, they’re offering extensions.
Subprime car loan extensions mean thousands in extra costs for drivers
The Car Dealership Guy, or Yossi Levi, is a market insider and consultant. He posted his concerns about the rising defaults on X.
More Americans are falling behind on their car payments:
— Car Dealership Guy (@GuyDealership) February 27, 2025
The latest auto asset-back securities data shows that subprime 60+-day delinquencies hit 6.56% in December—the highest ever recorded.
Even prime borrowers are slipping, though not nearly as much.
And lenders are doing…
To those familiar with the market, sentiments can get pretty apathetic. Often citing the rising costs, Americans aren’t buying new cars as often as they used to. Instead, they’re just keeping their old ones. The latest figure reflects an average vehicle age of 12.5 years old.
Moreover, late last year, financial experts sounded alarm over the number of U.S. drivers agreeing to car loan terms resulting in monthly payments over $1,000. While certainly, some motorists can afford their high-dollar payments without issues, many find themselves in a nightmare position they didn’t clearly understand to begin with.
Many dealers and sales staff express their concerns on social media about customers willingly signing up for high-interest car loans that inevitably leave them in personal financial ruin.
Unfortunately, offering drivers extensions on their loans, which pushes the overall term down the road and often includes a balloon payment at the end, likely won’t solve the problem.
Drivers, regulators, and sales staff need to do what they can to avoid setting up subprime loans in the first place
While motorists can’t necessarily stop “legal” predatory lending practices, we can get informed enough to protect ourselves while car shopping.
If you need a vehicle and don’t have the financial means to get into a great lease deal or prime (low-interest) car loan, figure out what you can afford in cash first. Do your best to avoid financing altogether and work on building up your credit.
All other options aside, if you feel that you have to enter a lien, borrow the least amount of money for the lowest rate possible. Pick one of the more reliable and efficient cars on the market to avoid costly upkeep, including increased insurance premiums.
