0As the U.S. economy faces inflation, high interest rates, and tightening household budgets, a troubling trend is emerging: auto loan delinquencies are climbing. According to a new LendingTree study, 5.1% of Americans are behind on their car payments, signaling a growing financial strain on consumers.
While the national average is concerning, the pain isn’t equally distributed. Some Southern states are seeing delinquency rates near 10%, raising red flags about deeper regional economic pressures and lending practices.
Southern States Hit Hardest by Delinquency Rates
The LendingTree study breaks down auto loan delinquency rates by state, and the numbers are particularly grim for the South:
| State | Delinquency Rate |
|---|---|
| Mississippi | 9.8% |
| Louisiana | 8.4% |
| Georgia | 7.8% |
| Alabama | 7.6% |
| South Carolina | 7.3% |
| Kentucky | 6.8% |
These states also report higher-than-average monthly car payments. While the national average is $751, residents in Louisiana pay $821 on average, and Mississippians pay $802, despite overall lower income levels in these states.
According to Matt Schulz, chief consumer finance analyst at LendingTree:
“Many of the states with the highest delinquency rates are among the lowest income states in the country.”
This mismatch between income levels and payment obligations is likely accelerating the default rates in these regions.
Which States Are Doing Better?
On the flip side, several states have managed to keep delinquency rates low. The lowest rates were found in:
- Alaska
- Utah
- Washington
- New Hampshire
Each of these states reported a delinquency rate of just 3.2%, with 28 states in total falling below 5%. These regions tend to have higher average incomes, lower vehicle ownership costs, or more robust public transportation options, reducing the reliance on expensive car loans.
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Who’s Falling Behind? Generational Breakdown
The study also breaks down delinquency rates by generation, and Gen Z leads the way—not in a good way.
| Generation | Delinquency Rate | Average Monthly Payment |
|---|---|---|
| Gen Z | 7.5% | $577 |
| Millennials | 6.9% | $735 |
| Gen X | 4.3% | $820 |
| Baby Boomers | 1.9% | $814 |
Even though Gen Z has the lowest average payment, their delinquency rate is the highest. This could reflect economic insecurity, student loan burdens, and early-career income limitations.
💡 Why This Matters: Economic Signals from the Auto Sector
Auto loan delinquencies aren’t just another statistic. As Matt Schulz notes:
“Auto loan payments are almost always a high priority for Americans… so rising delinquencies are a clear sign that people are financially stressed.”
Unlike luxury spending, car payments often reflect necessity-driven expenses, especially in regions with little public transit. Rising delinquency rates are a canary in the coal mine for deeper economic issues, particularly as interest rates remain high and inflation persists.
In the first quarter of 2024 alone:
- 2% of borrowers were 30 days late
- 0.9% were 60 days late
- Another 0.9% were 90–120 days behind
This growing percentage of missed payments may soon translate into higher repossession rates, reminiscent of Great Recession levels, where over 1.7 million vehicles were repossessed in a single year.
Conclusion: A Warning Sign from Main Street
While the broader economy may still appear stable on paper, the rising tide of auto loan delinquencies paints a more worrying picture. Americans are prioritizing transportation less—not because it’s not essential, but because they simply can’t afford it.
This should serve as a wake-up call for lenders, automakers, and policymakers alike. As inflation continues and economic pressure mounts, expect to see more Americans fall behind—and more cars taken back.
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