Auto loan delinquencies are at their highest levels since the Great Recession, reshaping risk for lenders and servicers. Here’s how to protect your portfolio and your bottom line.
Americans now owe more than $1.66 trillion in auto loan debt, making vehicle financing the second-largest category of consumer debt, trailing only mortgages. But as prices, rates and repayment terms stretch to historic highs, many borrowers are reaching a breaking point.
Delinquencies of 90 days or more past due have surged to their highest levels since the Great Recession, and repossessions have jumped 43 percent since 2022. Even borrowers with mid-tier credit scores (620-679) are now twice as likely to fall behind as they were before the pandemic
For lenders and servicers, these trends are transformative. As delinquencies rise, so do charge-offs, collection costs and compliance exposure. Understanding what’s driving this spike – and how to respond – has become essential for maintaining portfolio health.
Several forces have collided to create today’s volatility:
In short, auto lending is facing its toughest environment in more than a decade and lenders are carrying the weight.
When borrowers fall behind, the ripple effects hit every corner of a lending operation:
Preventing delinquency is far more efficient and far less costly than recovering from it.
While many delinquency drivers are macroeconomic, payment friction is one factor lenders can control. Late, failed or returned payments compound delinquency risk and disrupt cash flow. That’s where debit cards make a measurable difference.
Unlike ACH transactions (which carry return or NSF risk), debit card payments provide immediate, verified funds. This helps lenders:
When every missed payment matters, debit card payments restore control and consistency.
While ACH remains a dominant payment method in auto lending, its delayed settlement cycle and risk of returns can disrupt collections and cash flow. According to Nacha, ACH transactions typically settle within one to two business days, which means lenders face uncertainty until funds clear. Failed or returned payments also create downstream reconciliation work and increase administrative overhead.
By contrast, debit and realtime payment methods provide immediate fund confirmation and eliminate the return risk associated with insufficient funds or account errors. The Federal Reserve’s 2023 Payments Study found that credit and debit card payments experienced less than 0.1% return or reversal rates, compared to ACH return rates averaging 0.6%, a sixfold difference in payment reliability.
Security is another concern. The AFP 2025 Payments Fraud and Control Survey, published in partnership with J.P. Morgan, reports that 79% of organizations experienced attempted or actual payment fraud in 2024, with 38% citing ACH as a channel of attack. This vulnerability, combined with delayed settlement, makes ACH particularly challenging for lenders managing high-volume, recurring transactions.
Debit card payments help address these weaknesses by providing:
In today’s high-risk lending environment, reliability and speed matter as much as cost. Debit card payments give lenders the confidence that every transaction counts, helping stabilize cash flow and strengthen portfolio performance.
Use this quick assessment to see whether it’s time to modernize your payment strategy:
If you checked even two or more, your portfolio could benefit from debit automation: a faster, safer and more compliant way to stabilize revenue.
At REPAY, we understand that “just automate it” isn’t enough when compliance, technology and customer experience overlap. Our platform combines security, scalability and human support so lenders can modernize loan payment processing confidently.
By reducing delinquency risk and improving operational efficiency, REPAY helps lenders protect performance, even in volatile markets.
What’s causing auto loan delinquencies to rise?
Record-high car prices, extended loan terms and higher interest rates are straining household budgets.
Do debit card payments help?
Yes! These guaranteed-fund payments eliminate return risk and enable faster delinquency cures.
Can automation reduce charge-offs?
Yes. Automated reminders reduce late payments and improve recovery timelines.
Is implementing new payment technology difficult?
Not with REPAY. Our integrations and dedicated team streamline onboarding and help lenders manage compliance.
Rising auto loan delinquencies are a clear warning sign. Lenders that modernize payment operations today will be best positioned to protect their portfolios tomorrow.
With our model, lenders can cure delinquencies faster, reduce losses and operate with ease in every transaction.
Ready to strengthen your collections strategy? Talk to a REPAY payment expert today to learn how you can protect your lending portfolio.