A growing number of borrowers are struggling with late car payments as rising vehicle prices, insurance costs, and high interest rates continue to strain household budgets.
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Brett Holzhauer is a senior financial writer and editor with over a decade of experience covering personal finance, investing, and the U.S. economy. His work has been featured in Forbes and CNBC, where he focuses on helping readers make sense of real-world financial challenges.
Millions of drivers are experiencing bumpy roads as interest rates remain elevated, gas prices soar, and insurance prices continue to rise.
This is leading to several financial hardships, including many consumers being underwater on their loans, loan extensions to make monthly payments more manageable, and even falling behind, which leads to banks repossessing vehicles.
Here’s what’s going on, and what you can do if you find yourself in that position to rectify your financial situation and prevent repossession.
Related Article: How Late Can You Be on a Car Payment Before You Lose Your Car?
Being Mobile Is Becoming Unaffordable
Owning a vehicle is weighing down consumers substantially: roughly 1 in 4 Americans carry some sort of auto debt, and the average monthly auto payment is around $680. When you include insurance (premiums up 55% since 2020), maintenance, registration, and gas (average price is nearly $4.50/gallon), this monthly line item can easily reach $1,000. This comes at a time when most Americans don’t have $1,000 in an emergency fund.
More choices, less affordability
Car manufacturers have found a unique solution to improve profitability: sell more higher-trim models and fewer budget-focused vehicles. There are only 20 models available for under $30,000, compared with 25 in 2010 (adjusted for inflation).
Here’s where the numbers sit now: The average new car is right around $50,000, while used vehicles average $25,000. Both of these figures have outpaced inflation. And what makes it that much more expensive is the interest rates on loans, which can range from 4% to 21%.
Where the rubber meets the road
To make monthly payments more palatable, some are opting for extended loan terms.
When you finance a car, you typically get the choice of how long you want to pay off the loan. Because of rising car prices, many are choosing to extend their payments. Here’s an example of what that looks like:
- Vehicle price: $35,000
- Down payment: $5,000
- Amount financed: $30,000
- Estimated interest rate: 7% APR
| Loan Term |
Monthly Payment |
Total Interest Paid |
Total Paid Over Loan |
| 60 months |
~$594 |
~$5,640 |
~$35,640 |
| 72 months |
~$512 |
~$6,864 |
~$36,864 |
| 84 months |
~$453 |
~$8,052 |
~$38,052 |
More than one in five car loans stretches seven years or longer, according to Edmunds. This leads consumers to pay more in interest and potentially puts them behind the vehicle’s depreciation curve, leading to negative equity.
Where drivers crash and burn
Burdensome vehicle loans, sometimes with negative equity baked in from a previous vehicle, are becoming too much for consumers to handle. In Q3 2025, the Federal Reserve reported the auto loan delinquency rate (30 days past due) reached 3.88%, the highest level since the year after the Great Recession.
Depending on your home state, if you have even one late car payment, loan companies may have the right to seize your vehicle. In 2024, 1.73 million vehicles were repossessed – the most since 2009. The Consumer Financial Protection Bureau has documented this rising trend in its research on auto loan repossessions.
And losing transportation isn’t the only pain. Car repossessions stay on your credit score for up to seven years, making it more difficult to get another vehicle in the future.
What You Can Do Today
If you’re late on a car payment or simply realize you can’t afford the vehicle you have, you have several options to consider.
Contact your loan company
If you’re under financial pressure, contacting your bank or credit union that holds your loan is the first step. They may be able to help you through a deferment program that lets you freeze your loan. They would much rather work with you than take the vehicle back.
Refinance your auto loan
If you’re stuck in an auto loan that doesn’t fit your needs, you can refinance. This simply means you’re moving the debt on your vehicle from one bank to another. By doing this, you may be able to get a better monthly payment that fits your budget.
You can find out how much you can save by refinancing your car using our auto loan calculator here.
Consider selling your car and trading down
If your car is too expensive to maintain, you can always sell it and buy something more economical. If this is a potential option, first consider how much your car is currently worth. You can get a solid idea of this by using KBB.com and also comparing your vehicle to others in your area on sites like Facebook Marketplace or Craigslist. Of course, you can trade in your car to a dealership, but they will likely not give you the full value of your vehicle.
Bottom Line
Having a reliable vehicle is incredibly important for your day-to-day, but it’s also worth considering that your car could be holding you back from achieving your financial goals.
If you’ve missed a car payment or are about to miss a car payment, it may be time to consider ways to reduce your monthly vehicle expenses.
