Americans' car debt hits a record $1.66 trillion, fueling recession warnings
Rising car prices, higher insurance costs and longer loan terms raise risk of financial strain that analysts compare to 2008-era pressures
Americans now owe about $1.66 trillion in auto loans, a record total that surpasses federal student loan debt or credit card debt and is up roughly 20% since 2020 as inflation drains household budgets.
Delinquencies, defaults, and repossessions have risen in recent years, the Consumer Federation of America warned, raising concerns that the trend could foreshadow broader economic pain. "Families are in an economic pressure cooker," Erin Witte, the CFA's director of consumer protection, said.
Last year, about 1.6 million drivers were repossessed, the highest pace since the Great Recession, the CFA noted. The agency described the trend as a warning sign for the broader economy, pointing to the fact that households have shouldered higher car costs while wage growth has lagged.
The CFA highlights that the country’s debt burden is accompanied by rising prices for both new and used vehicles. The average price of a new car is about $49,856, with the typical monthly payment around $745; nearly one in five buyers pay more than $1,000 per month. Used cars are also expensive, with the average price around $25,393.
Insurance costs add to the burden, with premiums averaging about $194 per month. To keep up with higher prices, buyers are taking on longer loans: seven- and eight-year auto loans have become more common, a development that lowers monthly payments but raises the total cost of ownership over time.
Since the pandemic, automakers have raised prices to reflect constrained supply, including shortages of computer chips that control essential car electronics. The result has been a years-long push in sticker prices for new vehicles and elevated sticker prices for used cars as buyers competed for limited inventory. The price environment has been amplified by broader shifts in tariffs and trade policy that manufacturers say limit pricing flexibility.
Executives have acknowledged that sustaining affordability will require significant price discipline. Ford, for instance, increased the price on some Mexican-made models by about $2,000 in May. Subaru raised a base-model price by roughly 16% for 2026, with Volkswagen following suit. Toyota North America chief operating officer Mark Templin said in May that “business is not sustainable longer term without significant price increases,” underscoring the dilemma for the industry amid what he called an ongoing affordability problem.
Dealerships have also been implicated in the pricing dynamic. A SuretyNow survey of 1,000 dealership managers found that 82% reported raising prices on their lots, a sign that price increases are being transmitted along the sales channel as inventories tighten and demand remains firm.
Analysts warn that the current trajectory — rising debt, higher payments, and stretched household budgets — could act as a canary in the coal mine for the broader economy. While there is no consensus on timing, CFA researchers and economists caution that a sustained period of higher rates and persistent inflation could push more borrowers into delinquency and increase the risk of a consumer-led slowdown similar to, though not guaranteed to replicate, the 2008 crisis.