Honestly, the numbers coming out of the car market right now are a little jarring. We’ve spent the last few years waiting for things to "get back to normal," but if you look at the latest data on auto loan delinquencies, normal has a brand-new definition.
People are struggling. It’s not just a "poor credit" problem anymore. We are seeing a weird, slow-motion collision between pandemic-era car prices and the reality of 2026 budgets.
The Reality Behind the 2026 Auto Loan Delinquencies Spike
TransUnion recently dropped their 2026 Consumer Credit Forecast, and the headline is basically a sigh of relief mixed with a warning. They expect 60-day delinquencies to hit around 1.54% by the end of this year. Now, that sounds like a small number until you realize it’s the fifth year in a row that delinquencies have climbed.
It’s the trend that matters.
While the growth of people falling behind is actually slowing down—which is good news—the total amount of debt is still sitting at a massive $1.66 trillion according to the New York Fed. That is a lot of metal sitting in driveways that people can't quite afford.
Why subprime is hitting record lows (and highs)
Here is the kicker: if you have a lower credit score, things haven't been this tough since the 90s. Fitch Ratings pointed out that subprime delinquencies (people 60+ days late) hit over 6.6% recently.
Why? Because the "cheap" used car is basically a myth now.
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You’ve probably noticed it yourself if you’ve scrolled through a dealership site lately. A decent used SUV that used to be $18,000 is now $26,000. When you combine that price jump with interest rates that refuse to cave, the monthly math just stops working for a lot of families.
The "90-Month" Trap Nobody Talks About
Lenders are getting creative to keep the wheels turning, but it’s a double-edged sword. We are seeing "stretching." That’s the industry term for taking a loan that should be five years and pulling it out to seven or even nearly eight years.
TransUnion’s data shows that after refinancing, some effective loan terms are now averaging 90 months.
That is seven and a half years of payments on a machine that starts depreciating the second you drive it home.
Being underwater is the new normal
If you take a 90-month loan on a car, you are going to be "underwater" (owing more than the car is worth) for a long, long time. This is a huge factor in the current auto loan delinquencies news. When life happens—a medical bill, a job change, or a kid needs braces—and you try to sell that car to get some breathing room, you realize you owe $5,000 more than the dealer will give you.
At that point, some people just stop paying. It’s a "strategic default," even if they don't call it that.
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What’s Actually Happening with Repossessions?
It’s getting busy for the repo man. The American Recovery Association projected that repossession assignments could surpass 10 million units. That is a staggering number.
But it’s not all doom.
We are seeing a "bifurcation" in the market. That’s a fancy way of saying the market is splitting in two.
- The Prime Group: People with great credit are actually doing okay. Their delinquency rates are stable.
- The Rest: Everyone else is feeling the squeeze of "lifestyle creep" meeting "inflation reality."
Interestingly, the New York Fed noted that while more people are late on their payments, we aren't seeing a massive wave of bankruptcies yet. People are fighting tooth and nail to keep their cars. In most of America, if you lose your car, you lose your job. You can't get to work. So the car payment becomes the very last thing people stop paying, even after credit cards or sometimes even the mortgage.
The Federal Reserve Factor
We’re all watching the Fed. There is talk of more rate cuts throughout 2026, which should, in theory, help. But rate cuts don't fix the fact that many people are already locked into 11% or 12% loans from two years ago.
Refinancing is the escape hatch.
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Experian has seen a massive jump in refinancing—up nearly 70% in some segments—as people try to shave $70 or $100 off their monthly bill. If you're currently struggling with a high-interest loan, that might be your only real move.
Real-World Advice: Navigating the 2026 Crunch
If you are looking at your bank account and sweating over your next car payment, you aren't alone. The auto loan delinquencies trend shows that millions are in the same boat. Here is what actually works if you’re trying to avoid becoming a statistic:
1. Check your refi options today.
Don't wait until you miss a payment. Once you're 30 days late, your credit score takes a hit, and your chances of refinancing for a better rate vanish. If rates have dropped even 1% since you bought your car, call a credit union. They are currently dominating the refi market with about 65% market share because they’re offering much better deals than the big banks.
2. The "Rule of 5" still matters.
If you’re shopping for a new ride, ignore the monthly payment the dealer shows you first. Look at the term. If you can’t afford the car on a 60-month (5-year) loan, you can't afford the car. Taking a 72 or 84-month loan is just asking for a delinquency crisis three years from now when the repair bills start hitting while you still owe $20,000.
3. Talk to your lender before the repo truck shows up.
Banks actually hate repossessing cars. It’s expensive for them. They have to pay the tow company, pay the auction fee, and they usually sell the car for a loss. Many lenders have "hardship programs" that can defer a payment to the end of the loan. It’s not a magic fix, but it buys you 30 days of sanity.
4. Watch the "Negative Equity" trap.
If you’re trading in a car, make sure you aren't rolling thousands of dollars of old debt into a new loan. This is how people end up with $800 payments on a Toyota Corolla. It’s a cycle that almost always ends in default.
The bottom line? The 2026 auto market is finally stabilizing, but the "hangover" from the high-price years of 2022-2024 is going to keep auto loan delinquencies in the news for a while longer. The best defense is a boring one: buy less car than you think you need and pay it off as fast as you can.
Actionable Next Steps
- Audit your current loan: Check your paperwork for your current APR. If it's over 8% and your credit score has improved, call three local credit unions tomorrow morning to ask about refinancing.
- Calculate your "LTV": Look up your car’s trade-in value on KBB or Edmunds. Compare it to your loan payoff balance. If you're underwater by more than $3,000, prioritize extra principal payments now to avoid being trapped in the car if your financial situation changes.
- Set a "Maintenance Buffer": Since many people are now keeping cars for 7-9 years due to longer loans, set aside $50 a month specifically for tires and repairs. A surprise $1,200 transmission fix is often the trigger that causes a missed payment.