The cost of owning a car has never been higher. Inflation, tariffs and rising maintenance bills are leaving more Americans struggling to keep up with their auto loans.
A new report from the Consumer Federation of America (CFA) found that Americans owe a record $1.66 trillion in auto debt [1]. The group warns that the surge in delinquencies isn’t just squeezing household budgets — it could signal trouble for the broader economy.
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"Delinquencies, defaults, and repossessions have shot up in recent years and look alarmingly similar to trends that were apparent before the Great Recession," the report said.
Drivers are also shouldering record-high costs to stay on the road. The average new car now sells for nearly $50,000, with monthly payments around $745. Loan balances have climbed above $41,000 on average — and they continue to rise.
For many, that means a higher risk of falling behind, tough choices about whether to keep their vehicles and a growing need to budget carefully before signing on to new loans.
Lessons from the past, warnings for today
The distress now spreading through the auto loan market is stirring memories of the lead-up to the 2008 financial crisis.
Back then, the auto industry was one of the hardest-hit parts of the economy: new vehicle sales plunged nearly 40% and industry-wide employment was slashed by more than 45% [2]. Chrysler and General Motors teetered on the edge of collapse, requiring federal bailouts through the Troubled Asset Relief Program that left Washington holding a 61% stake in GM.
While the industry eventually recovered, it hasn’t been on cruise control since. The COVID-19 pandemic strained supply chains and caused wild swings in demand, leaving consumers facing limited options and sky-high prices.
Now, another shock is looming. Since April, the U.S. has imposed a 25% tariff on all imported automobiles under Section 232 of the Trade Expansion Act [3].
“What we’re seeing now is a structural shift, driven by policy, that’s likely to be long-lasting,” Felix Stellmaszek, Boston Consulting Group’s global lead of automotive and mobility, told CNBC. “This may well be the most consequential year for the auto industry in history — not just because of immediate cost pressures, but because it’s forcing fundamental change in how and where the industry builds.”
For everyday drivers, the pain is already visible. One in five trade-ins near the end of last year carried negative equity of $10,000 or more, according to Edmunds [4]. With borrowers falling behind on loans at levels not seen since before the Great Recession, the parallels are becoming harder to ignore.
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Steering clear of the potholes
If you’re shopping for a car right now, timing and discipline matter more than ever. With tariffs already pushing prices higher, buying sooner rather than later could save you from even steeper costs down the road.
But that doesn’t mean stretching your budget until it snaps. The smartest move is to walk into the dealership with a firm number in mind and the willpower to resist upsells. The risks with overextending are clear.
“Consumers owing a grand or two more than their cars are worth isn’t the end of the world, but seeing such a notable share of individuals affected at the $10,000 or even $15,000 level is nothing short of alarming,” said Jessica Caldwell, head of insights at Edmunds, in a 2024 release reported by CNBC.
Sticking to your budget is one way to avoid falling into that category, but it’s not the only tool drivers have. Refinancing, for instance, can lower your interest costs — and even a small drop in your rate could save you hundreds or thousands over the life of your loan. And remember, the true cost of ownership doesn’t stop at the sticker price. As vehicle values climb, insurance premiums almost always follow. Comparing quotes regularly can help you dodge unnecessary hikes and keep more cash in your pocket.
For drivers already stretched thin, the best protection isn’t wishful thinking — it’s making deliberate choices now before the road gets bumpier.
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[1]. Consumer Federation of America. “Driven to Default: The Economy-Wide Risks of Rising Auto Loan Delinquencies”
[2]. Federal Reserve Bank of St. Louis. “Auto Sales and the 2007-09 Recession”
[3]. The White House. “Fact Sheet: President Donald J. Trump Adjusts Imports of Automobiles and Automobile Parts into the United States”
[4]. Edmunds. “Negative Equity on the Rise: The Average Amount Owed on Upside-Down Car Loans Hit an All-Time High in Q3 2024, According to Edmunds”
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