Rising Strain: More Americans Fall Behind on Car Payments as Student Loan Repayments Resume
New Q1 2025 data shows U.S. auto loan delinquencies rose to 5.1%, driven by inflation, higher interest rates and the resumption of student loan payments — with younger borrowers and Southern states hardest hit nationwide.
Key takeaways
- 5.1% of auto loan borrowers were delinquent on at least one account in Q1 2025 — source: LendingTree — Auto Loan Delinquency Rates Study.
- State delinquency rates range from 3.2% to 9.8%, led by Mississippi; Southern states show the highest stress — data from LendingTree.
- Younger borrowers are most affected: Gen Z 7.5%, Millennials 6.9%, while Baby Boomers remain lower at 1.9% (LendingTree).
- Resumed federal student loan payments and higher interest costs are key drivers linking student and auto delinquencies — reporting from Morningstar / MarketWatch.
Investigating the numbers
LendingTree found that 5.1% of borrowers were behind on at least one auto loan payment in Q1 2025, a meaningful uptick that signals rising household stress among vehicle borrowers. Source: LendingTree — Auto Loan Delinquency Rates Study.
Delinquency severity has climbed as well: about 2% were 30 days late and nearly 1.8% were 60–120 days late combined — creeping levels of arrears that can quickly damage credit scores and increase repossession risk (LendingTree).
Where the problem is worst
Delinquency rates vary widely by state, from low single digits in some regions to 9.8% in Mississippi. Southern states dominate the high end — including Louisiana at 8.4% and Georgia at 7.8% — reflecting local economic conditions and affordability limits. Source: LendingTree.
These regional patterns matter because job markets, cost of living and average monthly car payments shape household budgets. Where monthly vehicle costs are higher, delinquencies tend to increase — a signal of stretched affordability.
Younger borrowers bearing the strain
Age matters: Gen Z borrowers carry the highest delinquency rate at 7.5%, followed by Millennials 6.9%, Gen X 4.3% and Baby Boomers 1.9%. Experts link this concentration to overlapping obligations: auto loans, student debt and pandemic-era credit histories that leave little buffer as relief programs ended (LendingTree; Morningstar / MarketWatch).
“Younger borrowers often carry both auto loans and student debt, and many started their credit histories during the pandemic when lending conditions were different.”
How student loan repayments factor in
A central driver recently is the resumption of federal student loan payments after the pandemic pause. When student bills returned, households reshuffled budgets and some reprioritized other obligations — notably car payments. Coverage links the return of student loan payments to higher auto loan delinquencies among already-strained borrowers (Morningstar / MarketWatch).
TransUnion data cited in coverage shows borrowers who became seriously delinquent on student loans between December 2024 and June 2025 also saw sharp rises in auto loan and credit card delinquencies. For those seriously delinquent on student debt, auto delinquencies rose from ~3.8% to 6.3% — roughly a 67% jump.
Interest rates, inflation and changing priorities
Higher interest rates and persistent inflation have squeezed household budgets for two years. The Federal Reserve’s policy has increased borrowing costs while food, gas and housing remain elevated. Many households face trade-offs and may prioritize mortgages or student loans over auto payments — a choice that has pushed up auto loan delinquencies (LendingTree; Morningstar / MarketWatch).
Size of the market and broader risk
Total U.S. auto loan balances were $1.642 trillion in Q1 2025, a 0.8% drop from the prior quarter — only the second quarterly decline since 2011. The outstanding stock of auto debt remains large even as borrowing cooled slightly (LendingTree; Federal Reserve Bank of New York — Credit Cards and Auto Loans).
Historical trends are worrying: coverage shows auto loan delinquencies have risen by more than 50% over 15 years, a trend that accelerated after the pandemic dip. Rising delinquencies can foreshadow broader household strain and potential lender losses (AOL; Morningstar / MarketWatch).
Lender response and borrower options
Lenders report rising delinquencies but not yet a dramatic spike in lasting defaults. Many are offering payment plans or short-term relief to avoid repossessions. For borrowers, options include contacting servicers early, exploring refinancing when feasible, or seeking credit counseling. Note: refinancing is tougher for subprime borrowers, who are overrepresented among those falling behind (Morningstar / MarketWatch; LendingTree).
Implications for Los Angeles, California
Economic impact: Los Angeles households face high living costs; rising auto delinquencies nationally increase the risk of repossessions and reduced mobility, which can disrupt access to work and essential services.
Political consequences: Local leaders may face pressure on affordability, rent relief and student loan support — with potential expansion of outreach and counseling programs.
Social and cultural effects: Younger Angelenos with student debt are particularly vulnerable; losing a vehicle can magnify inequality and limit job and education opportunities in a car-dependent region.
Practical advice: Residents should contact servicers early, explore hardship options, consider credit counseling and check eligibility for student loan repayment relief or income-driven plans.
Regional effects will vary across Los Angeles neighborhoods. Areas with younger populations, service workers and more subprime borrowers may feel pressure first. County and city agencies should monitor repossession trends and prioritize targeted assistance.
