Lydia Wedlock, editorial assistant, The Credit Union Connection
Falling behind on auto loan payments can be a living nightmare. Along with damage to one’s credit score, auto loan delinquency can eventually result in repossessions, and that can lead to other serious consequences. For example, challenges finding another way to work that can put your job at risk.
However, in recent months, there has been a noticeable decline in auto loan delinquency rates in certain areas of the country, and for credit unions, this means there are opportunities to help members continue to keep up with their payments, or if a member is struggling, provide resources to prevent the loss of their vehicles.
Auto Loan Delinquency in Decline…in Cities
According to WalletHub, between Q1 and Q2 of 2025, many cities across the United States saw significant declines in auto loan delinquency rates. The top ten cities that saw the greatest decrease in auto loan delinquencies were:
- Winston-Salem, NC
- Boise, ID
- Honolulu, HI
- Denver, CO
- Laredo, TX
- Gilbert, AZ
- Greensboro, NC
- Portland, OR
- Newark, NJ
- Nashville, TN
At the moment, the economy is not in the best position it could be, especially with the impact on members of tariffs felt in members’ purses and wallets and talk of rate cuts due to the increased inflation being brought about by those same tariffs. Despite this, many lenders during the second quarter of 2025 were able to keep their auto loan payments on track. In the case of Winston-Salem, N.C., along with declining auto loan delinquencies, there was also a noticeable decrease in credit card delinquencies, which may be an indicator of a strong push toward financial responsibility.
Many Car Owners Still Struggle
While cities across the country are seeing notable improvements, many borrowers struggle with their auto loan payments nationwide. According to LendingTree, 5.1% of Americans with auto loans are delinquent on at least one account, and Southern states in particular are struggling to make their payments on time. In Mississippi, 9.8% of auto loan borrowers have at least one delinquent account, 8.4% of borrowers in Louisiana, and 7.8% of borrowers in Georgia. Some of this can be attributed to borrowers living in those states having lower credit scores, and as a result, generally have to make larger payments every month.
Several states located in the Northwest, however, are seeing a completely different story playing out. Alaska, Utah, Washington and New Hampshire (located in the Northeast) are tied with only 3.2% of borrowers having a delinquent account.
Car Loan Delinquencies Across Generations
Location isn’t the only major factor when it comes to difficulties making auto loan payments. LendingTree’s research also found significant differences between the rates of delinquency among various age groups, and it’s the younger generations who are experiencing the greatest issues keeping up. Despite the fact that they have the lowest monthly payments at an average of $577 per person, Gen Z was found to have the highest rates of delinquency at a rate of 7.5%. Placing second were millennials with a delinquency rate of 6.9% and average monthly payments of $735 per person.
How Can Credit Unions Keep Their Members from Falling Behind?
What is clear is that many consumers are trying to make sound financial decisions and stay on top of their monthly payments. However, for a significant number of borrowers, keeping up with their payments is easier said than done. Additionally, for those looking to buy a car in the second half of this year, the impact of tariffs and overall lower consumer confidence will likely create even more problems for auto lenders. Credit unions will need to provide their members plenty of support to ensure that their auto loans don’t become delinquent – or worse.
Help Build Good Financial Habits
If there’s one thing credit unions assist with, it’s helping members make the most of their money. Credit unions can provide resources for members to better manage their finances and develop good financial habits, thereby increasing their chances of making timely payments. This, in turn, will help reduce credit union charge-offs and repossessions on their books.
Support Younger Members
During LendingTree’s study, they found that a significant reason that younger generations are struggling to make their auto loan payments is that they don’t earn as much as their older counterparts. They also tend to have lower credit scores, which means they must deal with the burden of higher interest rates. Credit unions will need to work closely with millennial and Gen Z members to help them build their credit, thereby reducing interest rates in the future.
Second-Chance Auto Loans
For those buying a car for the first time or those with lower credit scores, second-chance auto loans can be a vital lifeline in preventing delinquency. Additionally, these loans provide opportunities to educate and empower members, enabling them to build credit and achieve higher credit scores.
Due to inflation and tariffs, the auto loan market may appear uncertain as we approach the end of 2025. Still, credit unions can take steps to assist members and maintain auto loan delinquencies on a downward trend.