Serious Warning Signs From One Unnoticed Sector
Submitted by QTR's Fringe Finance
Real warning signs are starting to pour in from one corner of the market, with news out this week encouraging me to revamp my warning about one sector in particular.
I’ve been writing about this part of the market for years, but new data has emerged that wants me to put it front and center again.
I explicitly included auto finance—particularly subprime auto—in last October’s “10 Areas of the Market I Would Avoid” because the underlying fundamentals were already deteriorating while equity markets continued rewarding the space as though nothing had changed.
At the time, my concern was that investors were underestimating how quickly affordability pressures, weakening underwriting standards, and rising consumer leverage could collide. Since then, the data has only become more alarming, and the broader auto ecosystem increasingly looks like a slow-moving credit event hiding in plain sight.
The affordability math in the auto market has completely broken down. The average new vehicle transaction price remained just under $50,000 last month, a number that would have been difficult to imagine only a few years ago. Consumers have responded the only way many of them can: by borrowing significantly more money for significantly longer periods of time.
According to reporting from Autoblog, citing analysis from The Century Foundation and Protect Borrowers, total U.S. auto debt reached $1.68 trillion at the end of 2025, up from $1.23 trillion at the end of 2018, representing a 37% increase in just seven years. That total now exceeds outstanding credit card debt and is rapidly approaching federal student loan balances.
Nearly 86 million Americans—roughly one in four adults—now carry auto loan or lease debt. The average origination balance on an auto loan has risen to $33,519, compared with $24,782 in 2018, while the average monthly payment has climbed from $506 to more than $680 over that same period. Consumers are increasingly being forced into longer loan durations simply to keep those monthly payments within reach, with more than one in five new car buyers taking on seven-year loans in 2025.
The burden is even more severe for...(READ THIS FULL ARTICLE HERE).