Auto lenders today are operating in a landscape defined by unprecedented market volatility and converging pressures. Exacerbated by pandemic-era lending practices and accelerating negative equity, the average size of personal auto loans is up more than 20% since 2023, with consumers taking on more debt for their vehicles.
When compounded, these environmental factors create what lenders call a triple squeeze consisting of rising acquisition costs, higher borrower risk, and shrinking margins.
These trends underscore the growing importance of proactive partnership between lenders and borrowers, with a renewed focus on peace of mind and strategic risk mitigation.
Affordability pressures are reshaping borrower behaviour long before delinquency occurs. Car insurance premiums have increased roughly 55% since February 2020, according to Bureau of Labor Statistics data.
Parts, repairs, and maintenance have also climbed significantly, pushing the total cost of ownership has to levels that make even routine vehicle expenses difficult to absorb.
Still, vehicle purchase price is the biggest driver of the squeeze. Inflation, supply constraints, cross-border tariffs, and increased production costs have all contributed. TruStage consumer lending research shows that as borrowers take on larger balances and face rising monthly payments, lenders see a broader increase in loan delinquencies and financial strain. Credit union leaders have personally told me they have seen a marked increase in voluntary repossessions, where overwhelmed consumers are proactively turning over their cars, unable to shoulder the financial burden.
Portfolio data reflects this reality. Findings from NCUA show delinquency balances nearly doubled between 2020 and 2024, rising from $1.9bn to $4.6bn before easing slightly in 2025. At the same time, 9 in 10 consumers tell us that an unexpected life event could disrupt their ability to repay, reflecting a deeper sense of financial vulnerability.
With loan costs rising on the front end, borrower resilience weakening in the middle, and margin pressure intensifying across portfolios, lenders find themselves in the middle of the triple squeeze.
Borrowing patterns mirror this reality, with Americans now owing a record $1.66 trillion dollars in auto loan debt, making it the second largest category of consumer debt after mortgages. TruStage research found the average size of auto loans increased more than 20% from 2023 to 2025; now at $41,000. For many households, that payment competes directly with rent, groceries, and medical bills.
When budgets tighten, choices shift. Borrowers delay purchases, seek smaller or older vehicles, or pursue refinancing to bring payments down. These adaptations are not signs of temporary discomfort. They are indicators of a long-term affordability reset.
Larger loan amounts and more financially fragile borrowers mean that each loan approval carries deeper exposure than it did just a few years ago. A large auto loan is no longer a one-time underwriting decision. It becomes a long-term commitment requiring consistent monitoring and ongoing borrower support. Higher balances are harder for consumers to manage month after month, and they result in larger losses for the lender if delinquency occurs.
Compounding this problem, many lenders are still operating with underwriting frameworks designed for a very different rate and affordability environment. These guidelines were created when vehicle prices were lower, loan terms were shorter, and household savings were stronger. Today’s borrowers often need longer terms, flexible payment structures, or temporary relief options to stay financially afloat. When financial institutions’ standards for acceptable terms or rates cannot adapt to consumer realities, delinquency risk rises.
Elevated prices on vehicles and other goods have consumers carrying more debt. Our own research found 34% of consumers are using credit cards to cover rising costs, and the Federal Reserve reports delinquencies on auto loans and credit cards debt are up to levels not seen since the Great Financial Crisis.
Lenders feel the pressure on their own balance sheets. For many credit unions and community institutions, funding costs have risen by an estimated 235 to 287 basis points over the past few years, especially given the simultaneously growing cost of risk is from more delinquencies, more repossessions, and deeper loss severity.
When the cost of funds and the cost of risk rise at the same time, margins compress rapidly and strain becomes visible throughout the lending cycle, from origination to servicing.
Ultimately, servicing teams are experiencing the downstream effects, with more borrowers reaching out about extensions, hardship programmes, or refinancing, but often only after a payment has been missed.
Once delinquency occurs, both the financial and operational difficulty of resolving it increases. These patterns reinforce a critical takeaway for lenders: intervention must happen earlier, and institutions need tools that make it easier for borrowers to seek help before temporary strain turns into default.
The pressures facing consumers and auto lenders alike are clear. As macroeconomic factors and structural shifts continue to reshape the market, the more important question is how institutions can mitigate default risk and give borrowers greater peace of mind. To lessen the triple squeeze, a number of strategies arise for lenders as they work to improve borrower stability long before loan delinquency appears.
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Proactive Portfolio Management: Monitoring early-stage payment behaviour, insurance trends, and liquidity indicators enables lenders to identify risk sooner, reach out earlier, and reduce downstream losses. Additionally, by integrating behavioural and transactional data, lenders can achieve earlier, more accurate visibility into risk and tailor support to individual borrower needs.
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Innovative Lending Solutions and Embedded Protection: Borrowers are looking for stability and peace of mind within their loan agreements. Despite 80% of consumers indicating they would elect loan protection on their next loan, only 54% recall being offered these options. Embedded protection solutions are essential in today’s environment, delivering support during unexpected hardships and reinforcing lender-borrower trust.
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Leveraging Data Analytics for Enhanced Risk Assessment: The rise of digital and mobile loan applications provides real-time insights into borrower preferences and resilience. By integrating behavioral and transactional data, lenders can achieve earlier, more accurate visibility into risk and tailor support to individual borrower needs.
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Empowering Borrowers with Flexible Options: Consumers increasingly value refinancing pathways, unique loan structures, and enhanced digital resources. Flexible repayment arrangements and transparent hardship programmes strengthen borrower confidence, helping households remain in their vehicles during short-term disruptions and reducing overall delinquency risk.
The triple squeeze is more than a temporary downturn. It is a structural shift that will shape auto lending for years to come. Rising loan sizes, increased borrower fragility, and margin compression are converging to test even the strongest portfolios.
Lenders cannot manage tomorrow’s risks with yesterday’s playbooks, calling for institutions to prioritise solutions that empower resiliency and stability for lenders and borrowers alike.
Those that act now will not only weather the triple squeeze, but will help define what sustainable, borrower centered lending looks like in the decade ahead.
Corrin Maier, Vice President of Lending at TruStage
“Navigating the triple squeeze” was originally created and published by Retail Banker International, a GlobalData owned brand.
The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
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