The $1.7 trillion auto loan market heads for a crash
GM•US auto borrowers are taking on larger payments and longer loans to afford cars, while negative equity and delinquencies rise. The $1.7 trillion auto loan market includes $127 billion in securitized issuance last year, and subprime auto loans 60 days or more past due are hovering around 6%.
1. Borrowers take on more debt
The average monthly payment on a US loan for a new car reached $765 in the middle of this year, up from $550 in mid-2019. Used car prices remain nearly 30% above December 2019 levels, and buyers are increasingly purchasing older cars with longer repayment periods.
2. Negative equity grows
In the second quarter, cars purchased for $15,000 to $20,000 averaged six years old, compared with just over three years in mid-2019. Used-car loan terms averaged 67.9 months, while negative equity among used-car buyers rose to an average $5,114 in 2026 from $3,774 at the start of 2020. More than 30% of subprime loans originated in the first half of this year are scheduled to extend until the cars are more than 12 years old, up from 7% at the end of 2019.
3. Securitized loans face strain
Auto loans total $1.7 trillion, and $127 billion of auto debt was securitized last year. Fitch Ratings’ measure of subprime loans backing asset-backed securities that are at least 60 days past due is hovering around 6%, a historic high. The article warns that rising maintenance costs could leave borrowers with cars that wear out before their loans are paid off.
