One major issue driving the crisis is the complexity of auto lending itself. Most borrowers think they’re getting a simple auto loan, but the industry is filled with confusing financing models leases, “buy here pay here” arrangements, cross-collateralized loans, and dealer markups that aren’t always clear. Even regulators admit they don’t fully understand the scope of the problem. I’m seeing more and more people who don’t actually know how much they owe or how their payments were structured. When financing is fragmented and opaque, borrowers get blindsided.

Another factor making things worse is the unprecedented level of auto debt in America. Cars depreciate quickly, and with record-high loan amounts, many borrowers are stuck with negative equity meaning they owe more than their vehicle is worth. Last quarter, the average negative equity amount hit its highest point ever recorded. This traps people in place. They can’t trade in the car, can’t refinance, and can’t upgrade to something more affordable. They’re forced to keep a vehicle that’s financially underwater, hoping they can outlast the loan.

Meanwhile, the repossession industry has become far more sophisticated. Companies like Resolvion and DRN have fleets of camera-equipped cars that constantly scan license plates, uploading data into enormous databases. Repo agents can access this information for a fee, making it easier than ever to track down vehicles. Some of these companies even rely on gig-economy drivers who earn small rewards for spotting and reporting cars tied to delinquent loans. Technology has streamlined the repo process in a way that heavily favors lenders, not borrowers.

Financing trends are also contributing to the problem. Auto loan terms used to be five years. Now seven-year loans are common, and some lenders offer terms stretching to 144 months twelve years. That’s not normal. These long terms allow people to take on larger, more expensive vehicles, but they also guarantee slower principal payoff and deeper negative equity. The Consumer Financial Protection Bureau has already flagged extended loan terms as a root cause of rising delinquencies, and from what I’m seeing, they’re absolutely right.

What surprises a lot of people is that this crisis isn’t isolated to lower-income households. Higher earners are getting hit too. Delinquency rates among borrowers with average or above-average credit have nearly doubled since before the pandemic. And according to recent data, 40% of households making over $500,000 per year are living paycheck to paycheck. Lifestyle inflation, high housing costs, expensive vehicles, and rising daily expenses are putting pressure on families who, on paper, should be financially secure. This tells me the auto debt problem isn’t just a “poor borrower” issue it’s a national affordability issue.

Car repossessions don’t happen in a vacuum. They’re a warning sign of financial stress across the entire economy. When people can’t keep up with car payments one of the last bills most people choose to default on it means budgets are stretched past the breaking point. If current trends continue, the repo numbers we’re seeing today may only be the beginning.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

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