Auto Loan Delinquencies Soar

In the fall of 2025, a troubling signal is flashing across the U.S. economy: auto loan delinquencies are surging to levels not seen since the Great Recession. While the headlines focus on repossessions and subprime defaults, the implications run deeper—touching everything from consumer confidence to discretionary spending. For consumer packaged goods (CPG) companies, this trend is more than a financial footnote. It’s a warning sign of shifting household priorities, tightening wallets, and a potential recalibration of brand loyalty.

The Data: A Record-Breaking Spike in Delinquencies

According to recent data from Fitch Ratings, the percentage of subprime auto borrowers who are at least 60 days past due on their loans hit 6.65% in October 2025, the highest level since the firm began tracking the metric in 1994. This figure surpasses the previous record set during the 2008 financial crisis, underscoring the severity of the current consumer credit environment.

But the pain isn’t limited to subprime borrowers. Early-stage delinquencies (30+ days past due) are rising across all credit tiers, including near-prime and even super-prime borrowers. While prime delinquency rates remain relatively low at 0.37%, the upward trajectory suggests that even financially stable households are feeling the squeeze.

What’s Driving the Delinquencies?

Several converging factors are fueling this surge:

- Soaring Vehicle Prices: The average price of a new car in the U.S. now exceeds $50,000, up nearly 30% from pre-pandemic levels. Even used vehicles remain historically expensive, with average prices hovering around $28,000.

- Longer Loan Terms and Negative Equity: To afford these prices, many consumers have turned to 72- and 84-month loans, often rolling in negative equity from previous vehicles. This leaves them underwater on their loans for years.

- High Interest Rates: With the Federal Reserve maintaining elevated interest rates to combat inflation, average auto loan APRs have climbed above 9% for new cars and 13% for used cars, making monthly payments increasingly burdensome.

- Stagnant Wages and Rising Costs: While inflation has cooled from its 2022–2023 peak, core expenses like rent, insurance, and food remain high. For many households, auto payments are becoming the tipping point.

Repossession Resurgence

The downstream effect of these pressures is a dramatic rise in vehicle repossessions. Industry analysts estimate that 3 million vehicles will be repossessed by the end of 2025, approaching the 2009 peak of 3.2 million. Repossession assignments have already topped 7.5 million this year, a 20% increase over 2024.

This trend is straining lenders and dealerships alike. Several subprime-focused lenders—including American Car Center and Tricolor Auto Group—have filed for bankruptcy or exited the market entirely. Others are tightening credit standards, making it harder for lower-income consumers to finance vehicles at all.

Behavioral Shifts: The Psychology of Delinquency

Beyond the numbers, auto loan delinquencies offer a window into consumer psychology:

- Delayed Default: Unlike credit cards, auto loans are often the last bill consumers stop paying. A car is essential for work, school, and daily life. When borrowers fall behind on car payments, it often signals broader financial distress.

- Erosion of Financial Resilience: Many households depleted their pandemic-era savings by mid-2024. Without a cushion, even minor financial shocks—like a medical bill or job disruption—can trigger a cascade of missed payments.

- Changing Priorities: Some consumers are choosing to default strategically, prioritizing essentials like housing and groceries over car payments. This shift reflects a recalibration of what “essential” means in a high-cost environment.

Implications for the Broader Economy

The rise in auto loan delinquencies is not an isolated event—it’s a symptom of deeper economic fragility. Here’s what it could mean at a macro level:

- Credit Contraction: As lenders tighten standards, fewer consumers will qualify for auto loans, reducing vehicle sales and slowing economic activity in related sectors (manufacturing, insurance, aftermarket services).

- Consumer Confidence Dip: Rising delinquencies erode confidence, especially among lower-income households. This can dampen spending across categories, from travel to apparel.

- Labor Market Friction: In car-dependent regions, losing a vehicle can mean losing a job. This creates a feedback loop that further weakens household finances and local economies.

What This Means for CPG Companies

For consumer packaged goods companies—especially those in food, beverage, personal care, and household products—the implications are both subtle and significant. Here’s how the auto delinquency trend could ripple through the CPG landscape:

1. Downtrading and Private Label Growth

As consumers face tighter budgets, they’re increasingly trading down from premium brands to value-oriented or private label alternatives. This trend, already visible in grocery and household categories, may accelerate as more households redirect funds toward essential bills and debt payments.

Implication: Premium CPG brands may see volume declines unless they can justify their price premium through innovation, loyalty programs, or bundling strategies.

2. Shift in Channel Preferences

Consumers under financial stress often shift their shopping behavior—favoring discount retailers (e.g., Dollar General, Aldi) over traditional supermarkets or big-box stores. E-commerce may also see a bifurcation, with value-driven platforms gaining share.

Implication: CPG companies must optimize distribution and pricing strategies across channels, ensuring availability in discount and value-focused outlets.

3. Reduced Impulse Purchases

Auto delinquencies are a proxy for reduced discretionary income. As wallets tighten, consumers are less likely to make impulse purchases—especially in categories like snacks, beverages, and beauty.

Implication: Brands that rely on in-store displays or seasonal promotions may need to rethink their merchandising and promotional calendars.

4. Localized Impact in Subprime-Dense Regions

Auto loan stress is not evenly distributed. Regions with higher concentrations of subprime borrowers—often rural or lower-income urban areas—may experience sharper pullbacks in spending.

Implication: CPG companies with granular retail data can localize promotions, adjust inventory, and tailor messaging to reflect regional economic realities.

5. Brand Trust and Financial Empathy

In times of financial stress, consumers gravitate toward brands that demonstrate empathy and value. Messaging that acknowledges economic challenges—without being patronizing—can build long-term loyalty.

Implication: CPG marketers should consider tone, timing, and transparency in campaigns, especially when launching new products or price increases.

Strategic Takeaways for CPG Leaders

To navigate this environment, CPG executives should:

- Monitor consumer credit metrics—including auto delinquencies—as leading indicators of demand shifts.

- Invest in pricing architecture that supports both premium and value tiers, enabling flexibility across economic cycles.

- Double down on supply chain agility to respond to regional demand fluctuations and channel shifts.

- Leverage first-party data to identify at-risk consumer segments and tailor offers accordingly.

- Reinforce brand equity through purpose-driven messaging and community engagement.

A Dashboard Warning Light for the Consumer Economy

Auto loan delinquencies may seem like a niche financial metric, but they’re flashing red for a reason. They reveal the limits of household resilience, the consequences of prolonged inflation, and the fragility of a recovery built on credit. For CPG companies, this is a moment to listen closely, act decisively, and lead with empathy.

Tags: Behind the Metrics, auto loan delinquencies, CPG strategy, consumer credit, subprime defaults, repossession trends, consumer behavior, economic indicators, PGSNY, Thomas McCorry, Rochester, Penfield, Thomas McCorry Constellation