Key Points:
Repo-to-CPI Pipeline: Record auto delinquencies push repos to auction, wholesale prices fall, CPI used-car component drops, Fed sees cooler inflation signal.
Worse Than 2009: Auto loan serious delinquency hit 5.5% in Q2 2026, exceeding the Great Recession peak of 5.3%, with $1.71 trillion in total auto debt outstanding.
If Wholesale Keeps Falling: Cox Automotive projects used car values will finish 2026 essentially flat after cutting its forecast from 2% growth to 0.2%, with a further 23% surge in off-lease supply still arriving through year end.
Lender Pain Spreading: Ally Financial's retail auto net charge-off rate rose to 1.89% in Q3, up 1 basis point year over year, with provisions climbing $114 million to $529 million year over year.
Three years ago it was two. His boss just bought a second flatbed to keep up.
I can't stop thinking about that image. Six cars a night. From one driver. In one mid-sized city.
Here is the number that should bother you. Auto loan delinquencies just hit 5.5 percent. That is the worst reading since the government started tracking it. Worse than the bottom of the Great Recession. And it is not close.
The total damage sits at $1.71 trillion in car debt. That is trillion with a T. The average new car payment is now $787 a month. 21.2 percent of buyers pay more than a thousand a month. Just for the car. Not gas. Not insurance. Just the loan.
I don't think most people realize how we got here. During Covid, car prices went nuts. Dealers marked everything up. Buyers overpaid. And lenders stretched the loans out to make the payments look okay. Today 25.5 percent of all new car loans run 84 months or longer. Seven years. For a machine that starts losing value the day you drive it home.
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Now those cars are worth far less than what people owe. 29.1 percent of every trade-in that rolls onto a dealer lot is underwater. The average gap is $7,107. That means the owner has to write a check for seven grand just to walk away clean. Most can't. So they roll the old debt into a new loan. The hole gets deeper. The payment gets bigger. And when gas hits six bucks a gallon on top of it all, something breaks.
Here's what worries me. Those repo'd cars don't vanish. They get shipped to wholesale auctions. Manheim, the biggest auction house in the country, just reported that used car wholesale prices fell year over year in September for the first time since early last year. They had to cut their forecast for the rest of the year from two percent growth down to almost nothing. The reason is simple. Too many cars are landing on the auction block at once. Off-lease vehicles are surging 23 percent this year. Add the repo wave on top of that and you have a flood.
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That flood is the part nobody is connecting to the Fed meeting tomorrow. When used car prices drop at auction, it takes a couple months to filter into the CPI report. Used vehicles are a real weight in the inflation number. And they are now pulling it down. So when the Fed looks at the data Wednesday afternoon, the inflation picture will look a little better. A little cooler. A little more reason to hold rates right where they are.
But the cooling is a mirage. Prices are not falling because the economy is healing. They are falling because millions of families cannot afford to keep their cars. Ally Financial just reported that its auto loan charge-off rate climbed to 1.89 percent. That is up 1 basis point from a year ago. The provision they set aside for future losses jumped $114 million year over year. They see it coming.
Here is the one number I want you to remember. 5.5 percent. That is the share of all auto loan balances now 90 or more days past due. It passed the Great Recession peak. And it is still climbing.
I get it. This is not your problem. You probably paid cash for your truck. But it is your economy. The guy who mows your lawn, the woman who cuts your hair, the kid who bags your groceries. They drive to work. If the car gets towed at 2 a.m., they don't show up at 7. Senator Warren launched a probe into the repo industry in February. That is how big this is getting.
Nobody knows how many of those six-a-night repos turn into lost jobs by morning. What I do know is that the Fed will sit in that room tomorrow and look at a number that says inflation is easing. And part of the reason it says that is because a flatbed truck in Tulsa is running all night long.
More on this tomorrow.
— American Ledger
