American consumers are facing a surge in auto loan debt, with delinquencies up over 50% since 2010, making autos the riskiest credit product. Factors include record car prices, longer term loans, and rising maintenance costs. The country is experiencing a financial crisis as auto delinquencies signal deeper affordability challenges.

High car prices, averaging over $50,000, are contributing to the auto loan debt crisis. Drivers are increasingly underwater when trading in older models, with some carrying over $10,000 in debt during trade-ins. Overall, Americans hold over $1.66 trillion in auto debt, surpassing pre-pandemic delinquency levels and rivaling those before the 2008 financial crisis.

Car repossessions are on the rise, causing concern in the stock market. Delinquencies stem from lenders loosening credit standards and higher car prices. The Federal Reserve notes that delinquencies are concentrated in recent loans with higher monthly payments, affecting prime and subprime borrowers. Delinquencies among borrowers without credit scores are also increasing.

Economist Michael Brisson attributes the rise in delinquencies to lenders relaxing credit standards amid higher car prices. While the growth rate of delinquencies has slowed, prime borrowers are experiencing stark increases, driving the overall rise. Delinquencies among borrowers without credit scores have seen the largest increase on record. Unemployment and inflation control are key to reducing delinquencies.

Despite a leveling off in delinquency growth, prime and subprime borrowers are facing increased rates. Prime and near-prime consumers are driving the overall increase after lenders tightened lending standards. Delinquencies among borrowers without credit scores are also on the rise. Unemployment rates and inflation control will play a role in lowering delinquencies in the future.

Read more at Yahoo Finance: Auto loan delinquencies are soaring, with consumers hit by high car prices