Key Points

The subprime auto loan delinquency rate reached 6.8 percent at the beginning of 2026.
The 60-day delinquency rate stays elevated and exceeds levels from the Great Recession.
Lending to higher-credit-quality customers continues as solid business, with delinquencies near record lows.
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Granting a loan requires lenders to evaluate repayment likelihood carefully. Greater risk permits higher interest rates, forcing important trade-offs. Auto lending has seen firms take on excessive risk before, creating issues for investors now as subprime delinquency rates climb.

Exercise caution with risk levels

Stock ownership makes you a business stakeholder, underscoring the need to grasp company operations fully. Without that understanding, risks and rewards cannot be assessed properly. This matters especially for auto loan providers.

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Subprime auto lenders earn substantial profits in strong periods due to very high rates charged. Yet in downturns customers often default, straining these lenders financially. Even mild economic weakness can trigger problems.

For example, subprime auto lenders American Car Center and U.S. Auto Sales faced difficulties in 2023. In 2025, Tricolor Holdings encountered issues amid fraud allegations. By mid-2026, America's Car-Mart (NASDAQ: CRMT) needed lender support to continue. The 60-day delinquency rate hit a record high early in 2026, signaling trouble for this lending segment.

The subprime auto loan delinquency rate started 2026 near 6.8 percent. The 60-day rate exceeds Great Recession peaks. Investors should monitor firms such as OneMain Holdings (NYSE: OMF) and Credit Acceptance (NASDAQ: CACC).

High-risk loan conditions

OneMain Holdings posted a 5.37 percent 30-day delinquency rate in the first quarter, down from 5.85 percent prior but up from 5.16 percent a year earlier. Charge-offs increased from 7.83 percent to 8.02 percent year over year. Credit quality shows mild weakening. Credit Acceptance reported that loans from 2021 to 2024 underperformed forecasts, with 2026 originations also lagging expectations.

Investors may consider shifting focus. Bank and credit card firm Capital One Financial (NYSE: COF) serves lower-credit customers yet applies stricter standards. Its combined 30-day delinquency rate stood at 3.24 percent, improved from 3.59 percent and 3.51 percent previously. Auto loan delinquencies reached 4.21 percent, down from 5.23 percent and 4.93 percent earlier. Capital One demonstrates greater resilience through selective lending.

Adopt a prudent approach

Most investors should steer clear of lenders serving financially strained car buyers, especially amid rising delinquencies. Those drawn to higher rates should proceed carefully. Capital One offers exposure to lower-quality borrowers without extreme risk concentration. Higher-quality auto loan delinquencies remain near historic lows.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Capital One Financial. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.