More Americans are behind on car payments than ever before, with subprime borrowers feeling the most pain from rising car prices and higher interest rates.
The share of subprime borrowers at least 60 days late on auto loans hits a record 6.65% in OctoberThat's the highest level since data began tracking in the early 1990s, according to Fitch Ratings.
The crisis reflects a deeper affordability gap facing consumers in the auto market. Average price of a new car exceeded $50,000 for the first time, according to Kelly's Blue Book; and this trend is likely to accelerate as retail vehicle prices rise. from 4% to 8% by the end of 2025 With 2026 models arriving at dealerships nationwide, Cox Automotive says. At the same time, interest rates on car loans on average 7.1% for a car loan for 60 monthsAccording to Bankrate.
“If you're having trouble making payments, don't wait until the situation gets dire,” said Sean Tucker, editor-in-chief of Kelley Blue Book.
“You should contact your lender and let them know you are experiencing difficulty,” Tucker said. “They have programs for this, and generally speaking, they will make more money by helping you make payments than by taking your car and trying to sell it later.”
Smart buying tips in a difficult car market
Don't know where to start your auto shop journey? Here are some expert tips to help you find the best deal for your financial situation.
1. Shop for financing to you buy vehicle.
Tucker strongly recommends separating the two processes. Having financing offers available before choosing a new or used car gives you more leverage in negotiations with the dealer. “It’s a good idea to work with your bank or credit union ahead of time to qualify for what you may qualify for,” he said. “Now if the dealer can beat it, great, but then you won’t be stuck accepting the terms they give you.”
2. Consider domestic car brands first to get better deals.
Some domestic manufacturers have about 200 days of inventory, while popular import brands like Toyota only have 30 days, Tucker said. “That means they're much more willing to negotiate price with you, and these cars are probably better quality than you'd think if you haven't bought a car in about a decade,” he added.
3. Increase your down payment amount.
If possible, make a larger down payment – 15% to 20% of the sticker price. This reduces the amount of money you'll need to borrow, which can lead to better offers.
4. Avoid extended loan terms.
In October 27.5% of all car loans Loan terms were 72 months (six years) or longer, up 300 basis points from a year ago, according to Cox Automotive's Dealertrack Credit Availability Index. Although the monthly payment may be lower with a longer loan term, you will pay significantly more interest over the longer term.
“It's not a good idea to stay in car debt for a long time,” Tucker said. “People really focus on the monthly payment. You want to focus more on the bottom line of the deal.”
5. Sell your trade-in item privately or ship it to multiple dealers.
If you have a car that you plan to sell before you buy your next one, try selling it privately first. Often you will get a much higher price than the dealer can offer. Reverse side? This will require more effort and work on your part.
“If you decide to trade in your item with a dealer, shop around,” Tucker said. “If the dealer you're working with isn't offering you what you think the trade-in is worth, [it’s] it’s worth shopping around a little,” he added.
6. Choose cars with extended warranties over luxury cars.
You may be tempted to keep up with the Joneses and buy a luxury car, but practicality will benefit you more in the long run. Look for reliable cars with extended warranties; According to Tucker, some brands offer 10-year warranties on the powertrain. “A nicer car won’t add as much quality to your life as saving the difference,” he said.
7. If possible, buy a used car.
Cars are generally considered a depreciating asset, so it usually makes sense to buy a used car, especially if you're short on cash. But while you'll pay less for a used car, be prepared for sticker shock on these cars too.
According to Edmunds, the average selling price Three-year-old used cars cost more than $31,000. as of the second quarter of 2025. These vehicles are also taking longer to sell – 38 days, up six days from the same period a year ago. Dealers typically lower prices on their unsold 2025 inventory to make room for 2026 models, giving you a chance to get a better deal on a newer car.
