Car loan delinquencies are surging. Here’s what to do if you’re falling behind.

Millions of car owners are struggling to make their car payments, particularly those in the subprime category.

The share of subprime borrowers — those with a poor or limited credit history and a score between 501 and 600 — who are at least 60 days past due on their auto loans rose to 6.65% in October. This is the highest increase since 1994, according to data released by Fitch Ratings.

A new analysis by VantageScore suggests that auto loan delinquencies have evolved from being one of the least risky consumer credit products to one of the most prone to delinquencies among loan types.

“Auto loans have not followed the trends of other credit products as delinquencies have been persistently trending up across all credit tiers and income groups over the past 15 years,” said Dr. Rikard Bandebo, chief strategy officer and chief economist at VantageScore, in a statement. “Even after the industry tightened lending criteria three years ago, delinquencies have continued to rise.”

For borrowers who are already financially vulnerable, this can make repayment a challenging task.

Read more: What credit score is needed to buy a car?

So what’s driving this surge in car loan delinquencies? It’s a perfect storm of higher car prices, interest rates, and everyday costs.

The average transaction price of a new vehicle was $50,080 in September — the first time it’s ever crossed the $50,000 threshold, according to estimates from Kelley Blue Book. Higher costs paired with higher interest rates can also make it challenging for borrowers to cover their monthly payments.

Read more: Sticker shock: Car prices top $50K for first time in U.S., Kelley Blue Book says

The latest data from Experian indicates that the average car loan interest rate is 6.8% for new cars and 11.54% for used cars. This isn’t an all-time high, but there is a clear upward trend in new car loan rates since late 2024. For subprime borrowers, that figure is closer to 13.38%.

And, finally, auto loan costs aren’t the only budget line item Americans are struggling with. The cost of everyday goods continues to rise. The latest data from the Bureau of Labor Statistics showed the Consumer Price Index (CPI) rose 3% year over year in September, up from 2.9% in August.

A Capital One survey, conducted in partnership with the Decision Lab, sheds light on the affordability crisis and its impact on Americans, with more than half (56%) reporting concerns about their financial future and keeping up with the cost of living.

For subprime borrowers who are already typically given less favorable auto loan terms with higher down payments, interest rates, and fees, adding higher everyday costs to the mix can make payments feel unmanageable.

Read more: Auto loan delinquencies are soaring, with consumers hit by high car prices

Falling behind on your auto loan payment can not only pose an immediate negative impact in the form of a car repossession, but it can also have profound implications for your financial health over time. Missing or late payments on your vehicle loan can drag your credit score down significantly and leave a seven-year stain on your credit report.

This can make it challenging to boost your score and qualify for loans in the future, let alone loans with more favorable terms.

If you’re struggling to afford your car payment, there are a few steps you can take to be proactive and set yourself up for the best possible outcome.

1. Be up front with your lender: Reach out to your lender before you miss a payment to see if there is any assistance or forbearance program you qualify for. This way, you can buy yourself some time to sort out your next payment before it becomes a bigger issue and impacts your credit score.

2. Refinance your loan: If your credit score has improved since you first got your auto loan, it might be a good idea to shop around for a loan with better terms. Refinancing your existing car loan could lower your monthly payment and save you hundreds each year if you manage to secure a loan with a lower interest rate.

3. Sell your car or trade it in for a more affordable model: While it may not be the ideal outcome, when faced with a difficult financial situation, your best bet may just be to cut your losses and stop the financial bleeding before it gets out of hand. If you’ve built positive equity in the vehicle, meaning that you owe less than the car is worth, you could sell it or trade it in for a vehicle of lesser value to wipe out the loan and give yourself some breathing room.

Read more: 10 tips to improve your credit score