VantageScore March 2025 Report Reveals Alarming Trends in Auto Loan Delinquencies and Credit Scores

Rising Auto Loan Delinquencies and Declining Credit Scores in 2025

According to the latest CreditGauge report from VantageScore, the auto loan sector is showing signs of stress, with rising delinquencies reported for the second month in a row. The newly released February 2025 data outlines alarming trends that indicate challenging times ahead for borrowers and lenders alike, reflecting ongoing economic pressures.

Key Findings of the February 2025 Report

The report notes that every category of auto loan delinquencies has increased, reflecting a broader trend of delayed payments among borrowers. This uptick in delinquency rates is alarming, particularly as average credit scores amongst consumers have dipped.

The average VantageScore dropped by one point to 701, marking a shift after maintaining a stable score of 702 for 11 months.
The increase in late-stage delinquencies (payments overdue by 90-119 days) surged from 0.20% to 0.45%, a significant jump attributed to the collection of newly late student loan payments now appearing on credit reports.
* Borrowers are clearly under pressure, as they are prioritizing their debts amid rising costs. The renewed financial obligations stemming from student loans are making it more difficult for many to keep their auto loans current.

A Closer Look at the Auto Loan Sector

Auto Loan Balances and Originations:
The total balance on auto loans has increased year-over-year, with $413 more per borrower, representing a growth of 1.7%. Yet, new auto loan originations have remained stagnant at 1.36%. This stagnation suggests that even though existing borrowers may be financing more, fewer new borrowers are entering the market, indicating economic uncertainty.

Economic and Geopolitical Factors

Several factors could potentially impact the auto loan sector's stability moving forward. Economic headwinds, such as tariffs and geopolitical uncertainties, could influence interest rates and lending policies, making it tougher for borrowers to qualify for loans or manage their existing debts.

Insights from VantageScore Executives

Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore, shared insights into the situation, stating, "Borrowers are making tough choices to prioritize their debt obligations and auto loans are decreasing in priority. It's unusual to see a decline of this size, and we attribute the change to the increased demands of car loan balances and student debt repayment."

This statement captures the sentiment that many borrowers may be feeling pressured to allocate their finances elsewhere due to the overwhelming burden of multiple debts.

Conclusion

The February 2025 CreditGauge report serves as a critical reminder of the challenges facing the auto loan market and consumers, hinting at the broader economic landscape. As borrowers navigate these pressures, it remains crucial for lenders and policymakers to respond accordingly, ensuring that adequate measures are in place to support consumers during these turbulent times. As we proceed further into 2025, keeping an eye on these trends will be essential for understanding the health of the consumer credit system and the auto loan sector as a whole.