Auto loan payments may initially seem manageable, but for many Americans, unexpected expenses, car repairs, or financial shocks can quickly turn these obligations into unmanageable costs. Recent data from LendingTree highlights the growing risks of auto loan defaults and sheds light on which consumers and states are most affected.
Auto Loan Defaults Nationwide
As of the fourth quarter of 2025, 1.99% of consumers with recently active auto loans have a default on record. On average, borrowers with defaulted loans were paying $540 per month on loans totaling $24,223. Defaults typically occur 42 months into a 69-month loan term, indicating that long-term financing plays a role in financial strain. Among defaulted borrowers, 61.9% hold loans with terms of 72 months or longer.
Matt Schulz, chief consumer finance analyst at LendingTree, notes that $540 per month is a significant financial burden for most Americans. “High vehicle prices and elevated interest rates for those with imperfect credit make such payments unavoidable for many,” Schulz explains.
State-by-State Default Rates
Defaults are heavily concentrated in certain states. Louisiana has the nation’s highest auto loan default rate at 5.00%, more than double the national average. West Virginia (4.59%) and New Mexico (4.31%) follow closely. Schulz attributes these high rates to a combination of lower incomes and credit scores in these states, which leads to higher interest rates and unaffordable monthly payments.
Conversely, Minnesota (1.05%), Utah (1.13%), and Massachusetts (1.20%) have the lowest default rates, reflecting stronger average credit profiles and income levels.
Credit Scores Drive Default Risk
Auto loan defaults are overwhelmingly concentrated among consumers with lower credit scores. Deep subprime borrowers (credit scores below 580) account for 83.7% of defaults, while the average credit score among defaulted borrowers is just 529. Schulz explains, “Even small financial shocks can derail subprime borrowers’ ability to pay, especially given the high interest rates they face.”
- Deep subprime (<580): 83.7%
- Subprime (580–619): 11.1%
- Near-prime (620–659): 3.6%
- Prime (660–719): 1.4%
- Super-prime (720+): 0.2%
When Defaults Happen
The likelihood of default increases with the age of the loan. Only 8.7% of defaults occur within the first year, while 36.7% of defaults happen between two and four years after the loan is issued. Schulz points out, “Early on, payments feel manageable and the car is still reliable. But after a few years, repair costs and high balances increase the risk of missed payments.”
Tips for Managing Auto Loans
To avoid default, experts recommend carefully evaluating loan affordability before borrowing. Key strategies include:
- Shop for the best rate: Comparing lenders can help secure the lowest possible interest rate, even for those with imperfect credit.
- Build an emergency fund: Extra savings can cover unexpected expenses and prevent missed payments.
- Maintain your vehicle: Regular maintenance reduces the likelihood of costly repairs that could force loan defaults.
Methodology
LendingTree analyzed approximately 162,000 anonymized credit reports of consumers with at least one auto loan from October 1 to December 31, 2025. Defaults were defined as loans 90 or more days past due, charged off, in collections, or repossessed. Both active loans and loans closed within 90 days of the report were included to capture recent defaults.
