The Rising Tide of Auto Repossessions: A Warning Sign for the American Economy

The repo man has never been busier. In 2024, roughly 1.73 million cars were repossessed—the highest since 2009 when the United States was in the thick of its Great Recession. This fact seems to indicate a serious warning sign for Americans, and one that suggests deeper economic problems for the American economy in general.

Recently, the New York Times and Wall Street Journal published articles about the alarming rates of car delinquencies and repossessions, bringing national attention to a crisis that has been quietly escalating across the country.

The Data Behind the Crisis

According to the WSJ, the share of subprime auto loans that were 60 days or more past due reached nearly 6.5 percent in January and has lingered near that level, according to Fitch Ratings. The percentage of new-car buyers with credit scores below 650 was nearly 14% in September—the highest for the comparable period since 2016.

The NYT reported that roughly 2 percent of all auto loans were significantly overdue last month, according to Cox Automotive. Researchers at the Federal Reserve Bank of New York found that delinquency rates have been rising for borrowers across ZIP codes and credit score bands, while delinquency rates for prime borrowers have remained relatively steady.

The articles document troubling industry signs: repossessions have swelled, lenders such as CarMax and Ally Financial have warned investors, and two significant industry players—First Brands and Tricolor Holdings—recently filed for bankruptcy. As one portfolio manager told the NYT: "Tricolor just gave us a warning sign that something is going to crack here."

The Paradox: Strong Markets, Struggling Families

Yet these statistics exist alongside a contradictory reality: the stock market has been reaching historic highs.

In 2024, the S&P 500 hit 57 new all-time highs and closed with a gain of 25%. The NASDAQ gained 29.6% while the Dow rose 15%. As of December 2025, the S&P 500 has reached new records around 6,900 points, up 14.28% over the past year.

How can the stock market celebrate record highs while 1.73 million Americans lost their cars to repossession in a single year?

Because many Americans need their cars to get around, auto loan delinquencies can be a telling gauge of financial hardship. For millions of families, a car is not a luxury—it's a necessity for work, school, medical care, and daily life. Unlike stock portfolios, which primarily reflect the wealth of higher-income Americans, car ownership represents the economic reality of working- and middle-class households.

Thus the weakness in the auto market is a clear sign that low- and even middle-income families are facing serious financial pressure.

A Crisis Predicted Years Ago

These car delinquencies have been rising since well before these articles. The 2020 law review article "Driven to Bankruptcy" documented troubling trends that foreshadowed today's crisis.

Bankruptcy Has Become a Car Protection System

The researchers examined bankruptcy filings between 2013-2018 and found that 15.1 million people owning 16.4 million cars filed for bankruptcy. Their most striking finding: bankruptcy appears to be an important tool for some people to keep their cars, with approximately one-third of bankruptcy filers coming to bankruptcy owning automobiles and little else.

People who file bankruptcy own automobiles at the same rate as the general population (84.7% versus 84.8%) and overwhelmingly want to use bankruptcy as a tool to keep their automobiles. More than 85% of households state they want to keep their most valuable car.

The scholars emphasize that people use bankruptcy to save their cars primarily for access to jobs, schooling, and health care—not because of economic value. Filing bankruptcy may be more cost-effective than buying another car. With undermined credit scores, the only auto loan struggling borrowers could get is an expensive, subprime loan with high default risk.

Where the Bankruptcy System Fails

However, the researchers documented serious problems:

The Most Vulnerable Face the Highest Failure Rates: Chapter 13 cases for people who own little more than their cars are 33% more likely to be dismissed than cases of better-resourced filers. The researchers describe these as "precarious bankruptcies."

Paying to Stay Underwater: Many bankruptcy filers pay to continue paying on underwater auto loans. Households with negative equity essentially pay to file bankruptcy (about $3,200 in attorneys' fees for Chapter 13) so they can continue paying more for their cars than those cars are worth.

Racial Disparities Compound: African American households are more likely to enter bankruptcy with more expensive cars while owing more than those cars are worth, reflecting discrimination in the auto lending market. The bankruptcy system itself has "proven less useful for African Americans, especially to obtain a debt discharge." As the researchers explain, "bankruptcy will continue to compound racial disparities in household finance and wealth."

The Warning Signs Were Already There

In 2018, 31 percent of new auto loan originations went to borrowers with subprime credit scores. In comparison, in 2008—the year that triggered the Great Recession—only 10 percent of new mortgage originations went to subprime borrowers. Subprime auto lending in 2018 exceeded the subprime mortgage lending that helped cause the financial crisis.

Auto loan originations reached $584 billion in 2018, while 7 million Americans were over ninety days behind on car loan payments. The median chapter 13 bankruptcy filer owed over $11,060 with no equity in their cars.

The Bottom Line

Today's numbers suggest the scholars' worst fears have materialized. The 6.5% subprime delinquency rate in 2025 exceeds the concerning levels documented in 2018. The 1.73 million repossessions in 2024 match Great Recession levels.

While the stock market celebrates new highs, auto loan delinquencies reveal the growing financial strain on working families. These families are so desperate to keep their cars that they're willing to file for bankruptcy, pay thousands in legal fees, and continue making payments on underwater loans—all because losing their vehicle would mean losing their ability to work and provide for their families.

The New York Times profiles Jennifer Alba, 48, who bought a 2018 Subaru Outback in November 2021 with a $565-a-month loan. After losing her $100,000-a-year job in February 2025 and exhausting unemployment benefits, she stopped making payments. She still owes $16,000 on her car but can't sell it because it is now worth much less. "I would rather be a financially solvent person," she said. "My reality is that I am not."

Perhaps auto loan delinquencies, not the S&P 500, provide the more accurate gauge of how the American economy is truly performing for most Americans.