Auto Repossessions Surge as Loan Defaults Surpass Great Recession Levels

Car repossessions in the U.S. reached 1.73 million in 2024, with auto loan defaults exceeding Great Recession levels. Learn why this is happening.

The American auto loan market is facing mounting pressure as car repossessions have reached levels not seen since the financial crisis. In 2024, 1.73 million vehicles were repossessed in the U.S.—a 16% increase over 2023 and a staggering 43% jump from 2022, according to Bloomberg citing Cox Automotive data. More than 2.3 million borrowers defaulted on their loans, surpassing peak Great Recession numbers.

Late payments have spiked dramatically, particularly among subprime borrowers. Fitch Ratings reports that 6.56% of subprime consumers were over 60 days delinquent as of January 2025—the highest rate since the agency began tracking this data in 1994. Even among prime borrowers, delinquencies crept up from 0.35% to 0.39% year-over-year.

Multiple factors are driving the crisis. Car prices remain high, with the average new vehicle costing $48,039 in February 2025. At the same time, loan conditions have worsened, with average interest rates climbing to 10.16% and monthly payments holding steady at $748. The pandemic-era relief programs are long gone, and borrowers are now contending with tightened credit terms.

Compounding the issue is a looming 25% tariff on imported vehicles, introduced by President Trump. The U.S. International Trade Commission warns this could push average vehicle prices up by another 5% once dealer inventories run low, adding more financial strain.

Meanwhile, access to new auto loans is becoming harder. The New York Fed’s Survey of Consumer Expectations found that the perceived probability of loan rejection is at a record 33.5% since the survey's inception in 2013.

Compared to other types of consumer debt, auto loans are showing disproportionate distress. While student loan delinquencies are also rising, credit card delinquency rates have remained relatively stable, underscoring auto loans as the weak link in the consumer debt chain.

Although auto loan debt—at $1.66 trillion—is far smaller than mortgage balances ($12.61 trillion), the social consequences of mass repossessions are severe. Losing a car can mean losing access to employment, especially in areas lacking robust public transportation.

Analysts don’t foresee a crash on the scale of 2008, but the warning signs are hard to ignore. Looking ahead, the U.S. auto loan market is projected to grow modestly by about 4.56% annually through 2029. But that growth hinges on interest rate stabilization and broader credit relief for consumers.

Source: autoblog.com