Executive Summary
The U.S. automotive sector is navigating a complex landscape marked by escalating consumer debt, rising auto loan delinquencies, tightening credit conditions, increasing used vehicle prices, and the disruptive impact of tariffs on imported vehicles and parts. These factors collectively contribute to an environment of economic uncertainty, influencing consumer behavior and industry strategies.
1. Escalating Auto Loan Delinquencies
Auto loan delinquency rates have reached concerning levels, surpassing those observed during the 2008 financial crisis.
Subprime Auto Loans: Delinquency rates for subprime borrowers have climbed to 6.6%, the highest since tracking began, indicating significant financial strain among this demographic. Axios
Overall Auto Loan Debt: Americans owe $1.655 trillion in auto loan debt, accounting for 9.2% of total consumer debt.
90-Day Delinquencies: The percentage of auto loans at least 90 days delinquent rose to 4.8% in Q4 2024, up 15.8% from the previous year. LendingTree
2. Rising Consumer Debt and Financial Strain
Beyond auto loans, consumers are grappling with increasing debt levels across various credit products.
Credit Card Delinquencies: Rates at banks outside the top 100 have reached all-time highs of 7.8% in early 2025, exceeding peaks from the 2008 crisis.
Overall Consumer Loan Delinquencies: The delinquency rate on consumer loans for all commercial banks stands at 2.75%, higher than the pre-pandemic level of around 2.5%, and has doubled from 1.5% in 2021. LendingTree
3. Tightening Credit Market
Lenders are adopting more conservative underwriting practices, making it challenging for consumers, especially those with lower credit scores, to secure financing.
Interest Rates: The average auto loan interest rate is 6.35% for new cars and 11.62% for used cars. Experian Credit Report
Loan Terms: The average loan term for new vehicles is 68.0 months, with prime credit borrowers averaging 71.2 months and super-prime borrowers at 63.6 months.
4. Increasing Used Vehicle Prices
Used vehicle prices are experiencing upward pressure due to supply constraints and increased demand.
Average Prices: The average used car was listed for $25,180 in March 2025, up approximately $170 from February. Kbb.com
Wholesale Prices: Dealers paid significantly more at auction last month for used cars, indicating that retail prices are likely to rise in the coming weeks. Kbb.com
5. Tariffs Impacting the Auto Market
The implementation of 25% tariffs on imported vehicles and auto parts is disrupting supply chains and increasing production costs.
Ford: Announced a $2,000 price increase for the Mustang Mach-E, Maverick pickup, and Bronco Sport, citing the new tariffs. The US Sun+1Reuters+1
General Motors: Anticipates a $4 to $5 billion cost impact due to tariffs, leading to revised financial guidance for 2025. AP News
Volvo: Plans to cut 5% of its workforce at the South Carolina plant, attributing the decision to economic uncertainty linked to tariffs. New York Post
6. Economic Uncertainty and Consumer Behavior
The interplay of high consumer debt, rising delinquencies, tightening credit, and tariff-driven price increases is creating a volatile economic environment.
Consumer Caution: Consumers are advised to exercise caution when considering significant purchases, such as new cars or homes, in the current economic climate.
Dealer Strategies: Dealers are encouraged to focus on managing expenses, improving sales training, and building local trust to navigate the uncertain market conditions.
Conclusion
The automotive market and consumer debt landscape in May 2025 are characterized by elevated risks and economic uncertainty. Rising auto loan delinquencies, increasing consumer debt, tightening credit conditions, escalating used vehicle prices, and the disruptive impact of tariffs are key factors influencing consumer behavior and industry strategies. Both consumers and businesses are advised to proceed with caution, prioritize financial prudence, and adopt strategic adaptability to navigate the challenges ahead.
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