Consumer Delinquencies: Fed's Auto Loan Warning Holds in 2026

A cautious all-clear with one exception

In late November 2025, four Federal Reserve Board economists published a short note that reached a mostly reassuring conclusion. Robert Adams, Cord Barnes, Connor Bopst and Kamila Sommer used the New York Fed/Equifax Consumer Credit Panel, a nationally representative sample of anonymized credit files, to follow credit card and auto loan delinquencies from the start of the pandemic through the third quarter of 2025.1 Their main finding was that both measures had flattened, on net, in the quarters before the third quarter of 2025.1

The exception is the part that has aged best. Credit card performance held steady across credit scores, income groups and homeownership status, but auto loan delinquencies rose for lower-income households in the third quarter.1 The authors wrote that further increases in auto delinquencies "may be in store."1 Almost a year later, inflation has picked up again, grocery bills are still high, streaming subscriptions keep getting more expensive, and wages are trailing prices. Read against all of that, the note is less a closing verdict than an early marker of the pressure now showing up in household budgets.

What the Fed economists actually found

The note tells the story in three stages. Early in the pandemic, card and auto delinquencies fell as fiscal support and debt paydown improved household finances. Credit scores rose, and the share of nonprime borrowers shrank.1 From the third quarter of 2021, delinquencies started climbing again. They were at or above pre-pandemic levels by early 2023, and the earlier gains in credit scores began to reverse.1

The authors tie much of the auto stress to the cost of cars. Higher vehicle prices meant bigger loans, and together with higher interest rates that pushed monthly payments up nearly 30 percent between 2020 and 2023.1 Car prices started rising more slowly in 2023, so payments on newer loans stopped climbing as fast and delinquencies leveled off. Still, the note says prices remain elevated, and loans made in recent years continue to go bad at higher rates than pre-pandemic loans.1

The third-quarter figures were the warning. The seasonally adjusted auto delinquency rate rose 5 basis points, the largest quarterly increase since early 2024.1 The increase was concentrated in poorer areas. Rates rose about 70 basis points in low-income Census tracts and about 25 basis points in moderate-income tracts. Those two groups hold roughly 4 percent and 19 percent of outstanding auto balances.1 The accompanying data show the low-income auto rate went from 7.92 percent to 8.37 percent in a single quarter, while the rate in high-income tracts fell slightly, from 2.44 percent to 2.39 percent.2 Borrowers without a mortgage, whom the authors loosely call renters, also saw auto delinquencies rise.1

The note also makes a point about measurement that matters later. It leaves out severely derogatory accounts because those loans have usually been charged off and say little about whether a household can pay its current bills. The authors note that delinquency rates look higher when those accounts are included.1

The 2026 data: cards steady, autos not

The split the note identified has held up. On credit cards, the more alarming numbers come mostly from how delinquency is counted. The New York Fed's "stock" measure of card balances 90 or more days past due reached 12.8 percent in the second quarter of 2026. Critics say that figure is inflated by old charged-off debt that lenders now keep on credit reports for longer.31 The "flow" of balances newly becoming seriously delinquent was 6.97 percent, compared with 6.93 percent a year earlier, which is essentially flat.3436 New York Fed researchers have themselves said the flow figures better reflect how households are doing right now, and that card delinquency has been elevated but largely stable since 2024.3138 Bank data point the same way. The commercial bank card delinquency rate fell to 2.85 percent in the second quarter of 2026, its fifth straight quarterly decline from a 3.22 percent peak in 2024. That is still above the 2019 average of 2.59 percent.34

Auto loans look different. According to New York Fed figures, the share of auto balances at least 90 days delinquent reached a record 5.6 percent in the first quarter of 2026 and eased only to 5.5 percent in the second quarter, compared with a 2010 peak of 5.3 percent.30 One law firm's review of the auto lending market described first-quarter serious delinquency at 5.60 percent, up from 5.21 percent the quarter before and far above a long-run average of 3.59 percent.39 The New York Fed said the number of borrowers falling into early delinquency rose slightly for auto loans and mortgages in the second quarter but was steady for credit cards.3238 Auto balances rose $28 billion in the quarter to $1.71 trillion, and lenders made about $211 billion in new auto loans.32

The sources mostly agree on the numbers and differ in tone. One market strategist argues the card delinquency cycle has "already turned," but concedes that auto delinquencies are not improving the same way and that the weakest borrowers remain visibly stressed.34 Another commentator calls the viral card-delinquency alarm overblown and describes the situation as a distribution problem rather than a solvency crisis, at least for now.31 Both views fit the Fed note's original framing. Stress is concentrated by income and by type of loan.

Age is now part of the picture as well. The rate at which card balances of borrowers 70 and older moved into serious delinquency rose to 6.3 percent in the second quarter, the highest since 2011. Borrowers aged 18 to 29 were at 10.1 percent.3637

Grocery prices: slower increases, higher bills

The price environment explains why weak spots like these can grow. Grocery inflation in 2026 has been moderate. The food-at-home index was 2.2 percent higher in August than a year earlier, and the USDA's September outlook forecasts a 2.4 percent rise for the full year.2024 In September the grocery index slipped 0.1 percent from August and was 1.8 percent above a year earlier. Rice, coffee, lettuce and tomatoes still rose in price.23

Shoppers are paying levels that have built up over years. Grocery prices are up more than 20 percent over five years, according to Labor Department figures cited by ABC News, and the industry group FMI puts the increase since 2020 at more than 30 percent.2229 Beef is forecast to rise 9.4 percent in 2026.20 Lower inflation means prices are rising more slowly, not falling, and households pay today's levels with all the earlier increases included.25

The outlook for grocery prices is also getting worse. Oil prices driven up by the Iran war are raising diesel and transportation costs. One agribusiness economist expects food inflation to rise in the last quarter of 2026 because retailers and manufacturers cannot keep holding prices down on thin margins.2129 Diesel reached $6.28 a gallon this month, regular gasoline averaged $4.36 compared with $3.09 a year earlier, and a 20.4 percent jump in energy prices drove much of September's faster headline inflation.27 All-items CPI was already running at 3.4 percent in August.20 Wage growth slowed to 3 percent in September and has been slightly below inflation for five straight months, according to Numerator. Its data also show low-income consumers facing more inflation on everyday goods than the national average.26

Subscriptions add to the squeeze

Subscription prices are another steady cost. Every major streaming service has raised prices this year. Netflix's ad-free Standard plan is now $19.99, Peacock raised all its tiers in August, Apple TV went to $14.99, and Disney+ and Hulu pushed their ad-free plans to $21.49, the fourth increase in four years.101114 The Hollywood Reporter notes that streaming prices have risen about three times faster than overall inflation since 2022.15 One estimate puts a typical four-service, ad-free bundle at about $73 a month before taxes.18

The Fed note says nothing about streaming. In our view, though, small recurring charges like these reduce the room in a household budget, and the note's own data suggest that room is thinnest for lower-income renters with car loans.

The reading

The November 2025 note holds up well. Its reassurance about credit cards turned out to be right, and its concern about auto loans did too. The note lists inflation, unemployment, debt levels, interest rates and lending conditions as the factors that move delinquencies.1 In 2026, inflation has turned higher again because of energy, and wages have fallen behind. Consumers already sense the strain. The New York Fed's survey shows the expected chance of missing a minimum debt payment rising for two straight months to 13.2 percent in August.38

The main thing to watch is whether higher fuel and food costs spread stress from subprime, lower-income auto borrowers to prime borrowers. One analyst suggests that a slip among prime borrowers is the signal that would change the outlook.31 So far that has not happened. But the households the Fed economists flagged last fall are the ones most exposed to diesel-driven grocery inflation, higher gas prices and repeated subscription increases.