Auto Loan Delinquencies Reach a Record High — Here’s What to Do if You Can’t Make a Car Payment
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Auto loan delinquencies just hit an all-time high, surpassing a previous record that stood for at least 27 years.
As average auto loan costs soar, more Americans are missing their monthly payments — a move that can tank your credit score. But there are steps you can take to avoid the negative impact of falling behind on a car loan.
Fitch Ratings reports the delinquency rate for subprime auto borrowers was 6.11% in September, which is the highest level since the company began tracking the data in 1994. It's an increase in the delinquency rate for this group from 5.28% a year prior.
A car loan is considered delinquent when a payment is overdue (Fitch's data is based on 60-day delinquent loans). Delinquencies are seen most frequently in the subprime loan segment, which consists of borrowers with lower credit scores who mainly buy used cars at high financing rates.
If you fall behind on a payment by 30 days or more, your lender will likely report the account to the credit bureaus, which can lower your credit score. Having a bad credit score means it'll be more difficult to get approved for auto loans, mortgages and credit cards, or the interest rates on loans you qualify for will be higher, among other ramifications.
Rising auto loan delinquencies signal that a growing share of subprime borrowers don't have enough money to cover all their expenses.
