The cost environment is where this story starts. Average new-vehicle loan amounts rose faster than rates eased, keeping monthly payments climbing even as borrowing costs ticked down slightly. The average new-vehicle loan balance reached $43,582 in Q4 2025, up $1,882 year-over-year, pushing the average monthly payment from $746 to $767 despite a near-negligible rate change from 6.34% to 6.37%, per Experian's Q4 2025 Automotive Finance Market Report. On used vehicles, the average loan balance rose to $27,528 even as the average interest rate fell slightly to 11.26% still pushing the average monthly payment up to $537, the same report shows.

Those are market-wide averages. A record 20.3% of financed new-car buyers now pay more than $1,000 per month on the loan alone, up from 18.9% at the end of 2024, Bankrate reported in January citing Edmunds, which puts the Q4 2025 average new-car payment at $772. Full-coverage insurance adds another $225 a month nationally, per the same Bankrate data. Loan plus insurance alone puts the baseline carrying cost for a financed new vehicle near $1,000 before fuel, registration, or repairs.

Repair costs deserve more attention in this picture than they typically get. The typical automotive repair bill now runs about $838, S&P Global Ratings noted in its 2025 review roughly equivalent to a full month's new-car loan payment, per Auto Remarketing citing S&P and Kelley Blue Book. For a borrower already stretched thin, that kind of one-time bill can be enough to push a payment off the table.

Those new-car figures describe the broader market, not subprime borrowers specifically. Roughly 92% of deep-subprime buyers purchase used vehicles, according to Experian. Used-car financing for those borrowers carries interest rates of 19.38% for subprime and 21.81% for deep subprime, per the same Experian data turning even a modestly priced older vehicle into a financially punishing monthly obligation, on a car more likely to need that $838 repair.

Loan terms are stretching the exposure further. More than 20% of new-car financing now runs 84 months or longer, per Bankrate. Longer terms lower the monthly number but increase total interest paid and extend the period a borrower owes more than the vehicle is worth both factors that compound default risk when something goes wrong, and compound lender losses when the car gets repossessed and sold into a soft used-car market.

Layer in insurance, expected repairs, a double-digit interest rate, and a stretched loan term, and a subprime borrower financing a used car has almost no margin for an unexpected expense. That is the mechanism behind the delinquency record.

One clarification worth stating plainly: subprime means a history of late or missed payments, not low income. A borrower's credit tier reflects their repayment record, per Wolf Street. That distinction shapes who is at risk and why the problem stays contained rather than spreading through the broader market.

The record belongs to subprime auto ABS: 6.9% for 60-day-plus delinquencies in January 2026, Wolf Street reported citing Fitch. The prime tier tells a completely different story. The 60-day-plus delinquency rate for prime auto ABS held at 0.4% in January 2026 identical to January 2018, and less than half the 0.9% peak prime reached during the entire Great Recession. Throughout 2025, the gap between the two tiers ran more than tenfold, per Defi Solutions citing Fitch and TransUnion.

A careful read of that gap also clarifies what the subprime ABS data actually measures. It tracks a securitized slice of the market lenders who bundle and sell these loans to investors. Only about 14% of all outstanding auto loans and leases were rated subprime or deep-subprime at origination, Wolf Street reported citing Experian. The record lives in one heavily stressed slice of that minority not in the broader Equifax all-loans dataset, and not in the CUCollector below-prime securitized loan data, which tracks a separate but overlapping population of 28.5 million loans filed with the SEC.

Within the subprime slice, the deterioration runs deeper than headline rates suggest. Among below-prime borrowers in securitized loan data, the 60-day delinquency rate in December 2025 stood 76% above where it was in December 2019, according to CUCollector. The more telling figure is what happens after a borrower first falls behind. The share of those delinquent loans classified as "chronic" borrowers persistently behind rather than temporarily struggling rose from 53% in December 2019 to 69% in December 2025, the same CUCollector data shows. Once a below-prime borrower hits 60 days past due, more than 76% of those accounts eventually end in a charge-off.

The broader household credit picture provides context without offering much comfort to the borrowers in question. Foreclosures in Q4 2025 numbered 58,140 well below even the pre-pandemic quarterly range of 65,000 to 90,000. Third-party collections hit a record low of 4.6% of consumers. Bankruptcies at 123,820 remain far below the pre-pandemic range of 186,000 to 234,000, Wolf Street reported citing New York Fed and Equifax data. A New York Fed researcher described non-mortgage delinquencies broadly as having "stabilized or leveled off," per Longbridge citing the New York Fed.

The broader market's relative stability does not make the subprime problem smaller. It confirms the problem is structural and concentrated in a defined population not the early tremor of something systemic.

Record delinquencies alongside record securitization volumes and a growing subprime market share that contradiction is the substantive tension this story turns on.

U.S. auto loan ABS issuance reached $127 billion in 2025, the second consecutive record year, Auto Remarketing reported in February citing S&P Global Ratings. The market is not pulling back in the face of stress; it is expanding into it. The key to understanding why lies in how lender behavior has diverged.

Most lenders recalibrated their underwriting models after 2022's poor results, and loss curves on 2023 and 2024 subprime vintages have since trended lower than 2022. Some lenders did not adjust and are now reporting higher-than-anticipated losses along with credit rating downgrades, per Auto Remarketing citing S&P. That split some lenders tightening, others continuing to lend aggressively is what has kept aggregate issuance at record levels even as stress accumulates in the underlying loan pools.

The aggregate numbers show the combined result. Average annualized losses across the sector rose to 8.88% in 2025 from 8.51% in 2024. Vehicle recovery values what lenders recoup when they repossess and sell a car fell to an average of 37.74%, the lowest annual figure since 2007, the same S&P analysis shows. Falling recoveries mean each default costs lenders more even when the delinquency rate holds steady, which compounds the financial effect of rising charge-offs. Record ABS issuance shows capital is still flowing into the sector; it does not mean credit quality has improved.

At the borrower level, repossessions confirm the same story. The December 2025 repossession rate among below-prime borrowers hit 0.70% 59% above the December 2024 level and slightly above pre-pandemic December 2019, per CUCollector. Repossessions fall overwhelmingly on this population: 82% of repossessed vehicles in December involved borrowers who had been rated below-prime at origination.

This market has cycled through boom and bust before. A 1990s expansion ended with the delinquency rate hitting 6% by 1996. Lending standards loosened again in the early 2000s, and when the economy contracted sharply in 2008 to 2010, rates spiked again, Wolf Street reported. What distinguishes the current cycle is that the distress is more contained prime borrowers are largely unaffected, and some lenders have genuinely tightened while others have not, and issuance kept climbing regardless.

S&P projects issuance will soften about 3% in 2026 to roughly $122 billion, driven partly by weaker new-car sales, Auto Remarketing reported. Whether that modest pullback comes with meaningful underwriting discipline across the sector, or simply reflects fewer deals while standards hold where they are, is the question that will shape 2026 loss curves.

Subprime auto ABS delinquencies are at a record going back to the origins of this market. The borrowers behind those numbers are carrying used-vehicle loans at rates often exceeding 19%, in a cost environment where a single repair bill can equal a full monthly payment. Lenders are expanding into that population, not pulling back. The record is real. The crisis is contained. Both are true simultaneously.

For most borrowers with solid credit, this market is performing well. Prime delinquency at 0.4% is as clean as it has been in years. The record belongs to a specific, bounded segment of securitized loans, not the broader market.

For buyers financing with weak credit, the data is unambiguous: used-vehicle financing remains expensive, loan terms are lengthening in ways that extend underwater exposure, and the combined monthly cost of a loan, insurance, and maintenance leaves almost no room for the unexpected.

Three forward indicators will tell the real story for 2026: Q1 origination quality in the subprime tier, whether lender recalibration is holding across the sector, and the trajectory of the chronic delinquency share already 69% of 60-day delinquencies, up from 53% before the pandemic. The New York Fed's Q3 2025 report showed the tenth-percentile credit score for new auto originations rose by 9 points, suggesting some tightening at the riskiest end of the origination pool. Whether that held through year-end and into Q1 2026 will say a great deal about whether this is a problem being managed or one being deferred while the numbers keep climbing.