US Car Loan Payments Hit Record High Amid Rising Debt Crisis
- US auto loan payments reached an all-time high of $787 per month, fueled by rising vehicle prices and elevated interest rates, fxstreet.es reported.
- Average annual percentage rates for new car loans hover near 7 percent, driving the share of buyers with monthly payments of $1,000 or more to a record 21.2...
- Used car buyers face similar financial hurdles, borrowing an average of $30,703 at a 10.6 percent APR.
US auto loan payments reached an all-time high of $787 per month, fueled by rising vehicle prices and elevated interest rates, fxstreet.es reported. The average price of a new car has climbed past $50,000 according to Kelley Blue Book, marking roughly a 30 percent jump over a six-year period.
Surging Monthly Payments and Longer Loan Terms
Average annual percentage rates for new car loans hover near 7 percent, driving the share of buyers with monthly payments of $1,000 or more to a record 21.2 percent in the third quarter. Consumers are also taking out longer loans to manage these costs. Data from Edmunds shows that just over a quarter of new car loans stretch for 84 months or more, up from 23.9 percent in the second quarter and 21.8 percent the prior year. The overall average loan term sits at approximately 67.9 months, or 5.7 years.
Used car buyers face similar financial hurdles, borrowing an average of $30,703 at a 10.6 percent APR. Helen Colby, an assistant teaching professor at Carnegie Mellon University’s Tepper School of Business, told Fortune that these massive loans squeeze household budgets. For borrowers who already have budgets tight, obtaining a loan that long means committing for five, six, or even seven years to an increased expenditure that will reduce their budget for other things, like vacations, savings, or even basic necessities like food and clothing,
Colby said.
Subprime Vulnerabilities and Risk in the Auto Loan Market
Financial strain is particularly acute among subprime borrowers, with more than 30 percent of subprime auto loans originated in the first half of 2026 not paid off until the vehicle is 12 years old. That metric stood at just 7 percent in 2019. Furthermore, 1 in 5 Americans has fallen behind on at least one car loan, marking the highest level since 2010, fxstreet.es reported. These pressures prompted Reuters to declare in a headline that the $1.7 trillion auto loan market is heading toward a crash.
Lenders routinely package thousands of these car loans into asset-backed securities sold to investors, pension funds, and insurance companies. Fitch Ratings noted that the proportion of subprime auto loans backing asset-backed securities that are 60 days or more delinquent has risen to a record level above 6 percent. S&P Global characterized the sector as a colosal market, recording $127 billion in securitized issuance in 2025.
Systemic Financial Risks and Broader Debt Burdens
While lenders share structural similarities with the subprime mortgage crisis of the early 2000s by issuing credit to riskier borrowers and packaging the debt, the scale differs significantly. Total US auto-linked debt stood at approximately $1.71 trillion in June 2026, compared to $13.1 trillion in mortgage debt, keeping the systemic risk contained primarily within the automotive sector, fxstreet.es reported. Even so, widespread delinquencies could still introduce turbulence to the broader financial system.
This auto debt sits inside a much larger economic debt accumulation where the US government carries over $40 trillion in debt alongside surging corporate bankruptcies and heavy corporate leveraging. Observers note that further interest rate hikes by the Federal Reserve to combat price inflation would simply increase borrowing costs even further for consumers who cannot afford them.