The automotive industry reflects a “K-shaped” economy, with rising new vehicle prices. Auto loan delinquency rates remain high for those with low credit scores. Wealthier households are driving the market, while price-conscious buyers opt for used vehicles. Economists warn of widening economic disparities post-pandemic.

New car buyers face higher sticker prices, fewer discounts, and increased loan rates, especially for subprime borrowers. Average new auto loan rates are around 9%, reaching 18-20% for subprime consumers. Delinquencies, defaults, and repossessions are rising, particularly among subprime borrowers with FICO scores below 620.

Subprime auto loan delinquencies hit a record high in August at 6.43%. The Consumer Federation of America warns of a crisis as Americans owe over $1.66 trillion in auto debt. Rising delinquencies have led to increased complaints to the Consumer Financial Protection Bureau and unexpected collapses like Tricolor.

Record new vehicle prices last month were driven by strong sales of all-electric vehicles. Consumers rushed to buy EVs before federal tax incentives up to $7,500 ended in September. EVs are more expensive, with the average transaction price exceeding $58,000. The market is ripe for disruption in the automotive industry.

Read more at CNBC: New vehicle prices top $50,000 amid rising auto loan delinquencies