It turns out the latest indicator of household financial strain isn't in credit cards or mortgages -- it's sitting in the driveway. Car prices haven't gone down and interest rates have barely budged this year. To make payments fit, more buyers are stretching their auto loan terms further than ever.
A report from Edmunds last month showed a few unsettling records, as 22.4% of shoppers are using an 84-month or longer loan term to finance a new vehicle, up from 20.4% in Q1 2025 and just 17.6% a year earlier. With higher prices and longer loan terms, consumers are battling more debt, slower payoff, and rising delinquencies -- even among borrowers with strong credit.
Most recently, new data from VantageScore shows delinquencies on auto loans are at their highest level since 2010. Nearly 4% of balances are now at least 30 days past due, and what's notable is that this isn't just a subprime issue. Prime borrowers -- those considered financially solid -- are seeing the fastest rise in delinquencies.
The shift has been building quietly for years. The average car loan amount has jumped 57% in the past 15 years, outpacing every other major loan category. And according to data from Cox Automotive, the average price of a new vehicle just crossed $50,000 for the first time ever. With interest rates still high, one in five new loans now carries a monthly bill of $1,000 or more.
The Takeaway
For many households, the numbers are colliding with stagnant wages and persistent inflation pressures. The result: higher credit stress, even among higher-income earners.
This isn't just about car payments -- it's about household cash flow and how Americans are absorbing rising fixed costs. A client with a $1,000 car payment, high insurance premiums, on top of inflation pressures, will likely start trimming elsewhere first -- including retirement contributions or investment savings.
For younger clients, especially Millennials and Gen Z, financing a vehicle is increasingly the first (and sometimes largest) form of debt they take on. Longer loan terms and underwater vehicles can make it harder for them to build equity elsewhere.
For advisors, these trends are a reminder to look closely at non-mortgage debt when assessing overall financial health. Reviewing loan terms, exploring refinancing options, or even discussing lifestyle tradeoffs (buying used, leasing, or delaying purchases) can open up valuable conversations about financial flexibility.
Auto loans may not have been a portfolio topic in years past. Still, in 2025, they're becoming an early signal of consumer strain -- and an opportunity to help clients regain control before it spills into other areas of their financial lives.
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