Auto Delinquency Passed the Financial Crisis Peak

You need the car.

You're sitting in the finance office at the dealership. The guy slides a piece of paper across the desk. $765 a month. 70 months. You've done the math at home. The number on the page is different.

You sign anyway.

That scene plays out millions of times a quarter. In Q2 2026, Americans borrowed $210.8 billion in new auto loans. A record in the NY Fed's data.

At the same time, 5.5% of all auto loan balances sat 90 or more days past due. The NY Fed's series goes back to 2003. The Great Recession peak was 5.3%.

We are past the worst of the financial crisis, by this measure.

The actual series high was 5.6%, set in Q1 2026. Q2 eased to 5.5%. Both sit above the 2010 peak.

Total auto debt outstanding: $1.713 trillion. Average new-car payment: $765 a month. Average loan term: 69.5 months.

Lenders are not pulling back. The Dealertrack Credit Availability Index hit 105 in July, its highest since November 2015. Approval rates reached 74%. That was the fourth straight monthly increase.

The aggregate delinquency rate across all household debt is 4.7%. On the surface, the consumer looks fine.

But auto loans are past the financial crisis peak. And the new money keeps coming.

Auto loans are setting records on both sides of the ledger. But the losses sit in one place.

Fitch's subprime auto ABS index hit 6.9% sixty-day delinquency in January 2026. The worst reading in 32 years. Prime auto delinquency sits at 0.42%. Same country. Different planets.

TransUnion calls it a "K-shaped credit market." Super-prime borrowers gain ground. Non-prime borrowers fall behind.

The average subprime used-car APR is 19.10%. So the borrowers least able to pay are paying the most for the privilege.

Equifax says the aggregate numbers mask a structural split. The stress concentrates in non-prime borrowers, where credit has become less a tool and more a lifeline.

"Credit may have moved beyond a financial tool and may be becoming a necessity for managing the rising costs of living."

— Equifax, Q1 2026

And here's where it spreads.

Subprime auto ABS issuance is running strong in 2026. Lenders package the loans, sell them to investors, and use the cash to originate more.

Westlake Financial issued its fifth term ABS deal of the year in August. $1.37 billion. Assumed lifetime loss rate: 12.50%.

In February, Global Lending Services priced GCAR 2026-1: $907.7 million. Weighted average FICO on the loans: 574. Weighted average APR: 20.6%. Assumed lifetime losses: 16.9%.

Credit enhancement climbs with the risk. Westlake's A-class tranche carries 39.55% enhancement, down from prior deals. The market sees the risk, prices it, and buys the deal anyway.

Bloomberg analyzed roughly 3 million loans from four subprime lenders: Exeter, Santander, Carvana, and GM Financial. It found lenders use modifications and extensions to keep loans current on paper. On paper, those borrowers are fine. But they keep falling further behind.

Meanwhile, the next wave of losses starts on the day the loan closes.

In Q1 2026, 30.9% of trade-ins carried negative equity, per Edmunds. Average: $7,183. That debt rolls straight into the new loan.

Borrowers rolling negative equity average $932 a month in payments. 43% of them signed 84-month terms.

Across all new-vehicle loans, 25.5% now run 84 months or longer. Seven years. For a car.

Repossessions hit 1.73 million in 2024, the most since 2009. Each repo pushes used-car supply up and prices down, feeding more negative equity into the next trade-in. The cycle feeds itself.

Three more things worth keeping track of…

Britain's FCA confirmed a £7.5 billion motor finance redress scheme on March 30. It covers 12.1 million agreements where dealers overcharged hidden commissions between 2007 and 2024. Lloyds set aside £1.95 billion. Close Brothers put up £320 million. Four legal challenges partially suspended the scheme on July 2, with hearings not expected before this month. The UK's version of the auto-credit reckoning looks different from ours, but it comes from the same place: somebody downstream got a bad deal, and the numbers are catching up.

The NY Fed's Q2 2026 data tracks credit card delinquency by age. Borrowers 70 and older hit a 6.3% transition rate into serious delinquency, a 15-year high. Borrowers aged 18 to 29 hit 10.1%. Retirees on fixed incomes and the youngest borrowers are both breaking at the same time. The middle holds. The edges don't.

A Philadelphia Fed paper from April looks at the elevated auto delinquency figure. Its conclusion: the rise is "primarily driven by a decline in the rate of exit from delinquency." Loans stay past due longer before charge-off or repossession, which inflates the stock measure. If modifications are delaying exits rather than curing borrowers, the losses are still ahead of us. We'll see.

America's Car-Mart is one of the largest buy-here-pay-here dealership chains in the country.

In April, it closed 42 of its 136 locations. Nearly a third of its footprint, gone in one announcement.

Buy-here-pay-here works like this: the dealer sells you the car and writes the loan the same afternoon. The customer can't get credit anywhere else. The APR starts at double digits.

Then the dealer bundles those loans into asset-backed securities. Car-Mart has five outstanding ABS deals. So the dealer, the lender, and the securitizer are the same business.

When defaults run too hot, the dealer loses on the car and on the loan. The lot, the loan, and the bond come apart at once.

Every time, the lender keeps originating because the securitization market keeps buying.

I keep thinking about New Century Financial.

In 2006, New Century was the second-largest subprime mortgage lender in America. It originated $51.6 billion that year. Every dollar went straight into the securitization machine.

On April 2, 2007, New Century filed for bankruptcy. Its stock went from about $50 to under $1 in nine months.

The securitization market took every dollar New Century produced, right up to the end. Credit enhancement made the bonds look safe, but the loans underneath had already gone bad.

Car-Mart is a used-car lot, not a mortgage bank. The scale is different. But the loop is the same: originate, securitize, keep going.

The lot closes. The loans stay on somebody's books. We'll see.