2025-04-03T13:05:00.000Z

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As of January, over 6% of auto loans were delinquent by 60 days or more, according to Fitch Ratings. With the recent trend of vehicle prices rising and car payments surging, the outbreak of delinquencies might have only been a matter of time. But this uptick offers an insight into the fact that many households are struggling in the current economic climate. In December 2022, Kelley Blue Book data shows new car buyers paid an average of $49,958 for a new vehicle. Although the market has softened slightly since then, average car buyers are still spending an average of $49,740 to purchase a new vehicle. Don't miss Even if a driver opts for a used car, this could still put pressure on their budget. With KBB placing the average used car price at $25,565, finding an affordable used car can easily present a challenge. Beyond the vehicle itself, the current high interest rate environment can make financing that car expensive. Once borrowers lock in a high monthly payment, keeping up with that on top of other household expenses strains the budget. In some households, vehicle costs could push budgets to the breaking point and ultimately default on their car loan. Understanding the surge in car loan deficits Car loan defaults are on the rise, reaching an all-time high. Under the hood of this rising issue, many factors tie into the situation. First off, car prices are higher than they used to be. And not only are they more expensive, average monthly payments have gone up too. In the third quarter of 2024, the average monthly payment for a new car was $737 and drivers had an average loan term of 68 months. For a used car, the average monthly payment was $520 with an average term of 67 months. In either situation, that’s a significant amount of funds to dedicate to vehicle financing each month. Of course, some borrowers pay less than the average. But many drivers pay much more than the average. For example, Alejandra Gaxiola told WTAJ she bought her EV for $60,000 two years ago and faces a payment of almost $1,000 per month. “Almost a thousand dollars for our car is just, you know, it’s a little crazy,” Gaxiola said to WTAJ. In addition to the purchase costs, other vehicle-related costs are putting pressure on household budgets. Notably, car insurance costs have climbed in recent years.