Growth in Auto Loan Sector Accompanied by Increase in Overdue Payments
Rising Auto Loan Delinquencies Among Younger Borrowers and Those with Subprime Credit Scores
The latest report from the New York Fed has revealed a concerning trend in auto loan delinquencies, particularly among younger consumers and those with subprime credit scores. This trend mirrors findings from TransUnion, as previously reported by WardsAuto.
The total originations for new- and used-car loans and leases in the second quarter of 2025 reached $187.9 billion, marking a 4.9% year-over-year increase. However, this growth in the auto loan market has come with a cost, as delinquency rates continue to rise.
According to the Federal Reserve Bank of New York's Q2 2025 Household Debt and Credit report, auto loan delinquencies for borrowers 60+ days past due reached 1.31% in Q2 2025, surpassing levels seen during the Great Recession period (2009). Moreover, 90+ day delinquencies rose to 4.99% of outstanding balances, up from 4.43% the prior year.
The causes of this rise in delinquencies are multifaceted. One factor is the expansion of credit, as new auto loan originations reached $188 billion in Q2 2025, indicating strong demand but also increasing exposure. This growth in originations, particularly among prime and below-prime tiers, expands the pool of borrowers who may be at higher risk of delinquency.
Another factor is the economic environment and consumer adaptation. While delinquencies have climbed to levels higher than in the Great Recession period, the pace of increase is slowing, suggesting some stabilization. Yet many consumers—especially younger ones and those with weaker credit—are still relying on credit to manage everyday expenses, which may contribute to payment challenges.
Vintage performance also plays a role in the rising delinquencies. Newly issued (2024 vintage) new-vehicle loans show elevated delinquency levels compared to 2019, especially in prime and below-prime categories. Used-vehicle loans from 2024 perform better than those from 2022 and 2023 but are still worse than pre-pandemic benchmarks.
The rising delinquencies have potential impacts on the credit market and household financial health. Persistent delinquencies can increase risk for lenders, tighten credit availability, or raise borrowing costs for riskier groups. For younger and subprime borrowers, elevated delinquency rates may lead to worsening credit scores, higher default rates, and increased financial stress.
The New York Fed's report also highlights that the youngest borrowers, aged 18 to 29, showed the biggest increase in delinquencies. In the second quarter of 2025, 4.58% of this age group transitioned to 90 days-plus delinquency, an increase from 2.43% a year ago.
Despite these concerns, there are signs of hope. TransUnion and other analysts suggest that the rate of increase in delinquencies is slowing, indicating that delinquencies may be near a peak. This could signal an approaching leveling off or improvement, though risks remain.
In summary, the rise in auto loan delinquencies among young and subprime borrowers in Q2 2025 largely reflects increased borrowing combined with financial pressures on vulnerable consumer segments. While the overall auto loan market is expanding, the elevated delinquency rates raise concerns about credit risk and household financial health, though the pace of worsening appears to be slowing, potentially indicating stabilization soon.
Finance-related matters are at the heart of the concerns raised by the latest reports on rising auto loan delinquencies among younger borrowers and those with subprime credit scores. This troubling trend could lead to significant implications for the credit market and household financial health, particularly for those carrying higher risk due to their credit profiles or financial situations.
