Are car loan delinquencies a sign of a struggling economy?

Car loan delinquencies are now at their highest level since 2009 and some economists are sounding alarm bells for what it means for the economy.

Delinquencies, defined as 60 days or more past due, are up 51.5% in 15 years, said VantageScore. An estimated 1.73 million vehicles were repossessed last year, the highest total since 2009, according to data from Cox Automotive

Some economists have said the car market is a bellwether for the economy. They say a car is essential to getting to work and low-income Americans tend to put the highest priority toward paying auto loans — so, if they aren’t paying, it’s a big deal.

Critics of doom-and-gloom auto forecasts argue the delinquencies are tied to lending practices of dealerships and not an indicator of the economy. The percentage of new-car buyers with credit scores below 650 was nearly 14% in September, roughly one in seven people, J.D. Power said last month. That is the highest for the comparable period since 2016.

Question: Are car loan delinquencies a sign of a struggling economy?

Economists

Kelly Cunningham, San Diego Institute for Economic Research

YES: Consumer struggles to make ends meet signal multiple indicators of economic instability. U.S. indebtedness continues climbing by both amount and proportion to the nation’s overall economic production. Higher GDP debt poses several risks for the economy: elevated inflation, higher interest rates, reduced private investment, potential financial crises. This vulnerability is prolonged by the federal government continuing to issue debt, further increasing the nation’s precarious position of heightening inflation and diminishing value to the U.S. dollar.

Caroline Freund, UC San Diego School of Global Policy and Strategy

YES: Especially for low-income workers. We’re living in a K-shaped economy, where the affluent keep pulling ahead while many others juggle multiple jobs just to get by. The top 10% earners now drive nearly half of consumer spending, while everyone else hunts for bargains and low-cost options. If the AI boom continues, the divide will grow wider. But if that boom fizzles, the pain will ripple through the whole economy.

Alan Gin, University of San Diego

YES: Job growth has slowed significantly at the national level. That means that fewer jobs are available, and there is less upward pressure on wages. The slow job growth has not yet had an impact on the unemployment rate, so people are not losing their jobs yet. At the same time, inflation has reduced people’s purchasing power. Spending more on other products, especially housing, means households have less to spend on car payments, which is leading some to default on their loans.

James Hamilton, UC San Diego

YES: High car prices and weak incomes are making it hard for many people to keep their car. Another factor is looser credit standards. Many people received loans who would not have been eligible a few years ago. This in itself would be one cause of higher delinquency rates even if there had been no change in the economy. But these looser lending standards raise concerns of their own about the soundness of the financial system.

Norm Miller, University of San Diego

YES: In the early 2000s we saw a surge in subprime mortgage lending that resulted in the 2009-2011 meltdown of the bottom half of the housing market. Since then, the mortgage underwriting standards have significantly improved, but we have witnessed a lowering of standards for car loan lending, which is now, with higher interest rates and a softening job market, resulting in higher delinquencies. This is not a doomsday signal, but it is one worth watching.

David Ely, San Diego State University

NO: Rising car loan delinquencies are evidence of stress in a segment of the economy and should be monitored. While this development may lead to a noticeable impact on overall consumer spending, it does not yet appear to be significant enough to conclude that the economy is struggling. U.S. GDP grew at an annual rate of 3.8% in the second quarter of 2025 and is expected to continue to grow in 2026.

Executives

Phil Blair, Manpower

YES: Young and old cannot afford cash outlays to buy a car, used or new. And they certainly cannot afford a house at these interest rates. If car loan delinquencies rise it is a forbearer of bad news. When consumers can’t afford their car, then they certainly don’t have expendable income to grow our economy.

Gary London, London Moeder Advisors

YES: It doesn’t actually matter that some attribute delinquencies to lower qualifying buyers. In fact, that is the point: There are more lower qualified buyers because more Americans are struggling. This is actually reminiscent of the debacle caused by granting home loans to marginally qualified buyers, which was a precursor to the Great Recession. Car loans as a bellwether are part of a whole barrage of indicators trending negative including employment and inflation.

Chris Van Gorder, Scripps Health

YES: One of the first signs of a problem in the economy is defaults on small loans and that would include auto loans. As the article noted, auto repossessions this year are the highest since 2009. The stock market also declined recently, hurt by drops for mid-sized banks as worry flared about the loans they’ve made. This is likely true for auto loans as well – thus the repossessions and defaults likely to increase next year.

Jamie Moraga, Franklin Revere

NO: The economy continues to show mixed signals — GDP growth, stable employment, and resilient consumer spending temper concerns, even as car loan delinquencies hit record levels. While troubling, auto loan trends alone don’t indicate a weakening economy. They do signal household financial stress, driven by lenders issuing risky loans and consumers taking on unaffordable vehicles. These delinquencies can be an early indicator but must be assessed alongside other economic metrics.

Bob Rauch, R.A. Rauch & Associates

NO: Rising car loan delinquencies can be a warning sign of economic stress, especially among lower-income or financially vulnerable households, or “subprime borrowers.” While delinquencies have surged for loans originated since 2022, inflation has made new car prices soar, and insurance costs are high as well. However, as of today, most delinquencies are concentrated among subprime borrowers. If prime borrowers begin defaulting, it could signal deeper systemic issues that I do not see coming right now.

Austin Neudecker, Weave Growth

YES: Auto delinquencies are honking in distress with 60-day late payments at the highest in 15 years and annual repossessions surpassing 1.7 million. Car payments are an indicator of economic health because most Americans rely on cars for their commute or work and therefore prioritize these expenses. High prices, insurance costs and maintenance continue to rise while economic uncertainty and layoffs increase.

Not participating this week:Ray Major, economist

Have an idea for an Econometer question? Email me at phillip.molnar@sduniontribune.com. Follow me on Threads: @phillip020