Are surging auto delinquencies the canary in the coal mine for Cars.com (CARS)?
Delinquencies on U.S. auto loans are surging among subprime borrowers, offering a worsening credit signal that could foreshadow trouble for car marketplaces such as Cars.com (CARS).
According to Fitch Ratings, the share of subprime borrowers who are at least 60 days late on their payments reached 6.65% in October, the highest level since record-keeping began in the early 1990s.
Rising delinquencies are problematic because they reduce the pool of financially healthy buyers. When subprime borrowers struggle, it can reflect broader stress in the credit-fueled auto market.
That pressure has already surfaced dramatically, with subprime auto lender Tricolor collapsing and shuttering operations in September.
While the impact on Cars.com is indirect, it merits attention. Cars.com operates as a marketplace linking auto buyers and sellers, offering listings, pricing information, and dealer tools.
It’s not a lender, and therefore not directly exposed to loan performance, yet deteriorating credit trends may ripple into its business model.
The pressure is especially acute in the used-car market, where delinquencies can run higher and where Cars.com hosts a large share of its listings.
If more consumers fall behind on payments or face repossession, dealers may pull back on acquiring inventory and could scale back marketing budgets, including the listing and advertising products that Cars.com relies on for revenue.
While CARS stock hasn’t yet reacted to the latest surge in delinquencies, its valuation already reflects broader softness in the auto segment.
CARS stock's ongoing struggles
Shares of Cars.com have been sliding for most of the year, plunging in the first quarter and never recovering those levels.
The stock is down more than 36% year-to-date and nearly 40% over the past 12 months. According to Yahoo Finance data, it has been a chronic underperformer for at least five years.
Much of the pressure stems from disappointing earnings and a murky outlook. Cars.com delivered mixed results in the first two quarters of the year and, citing macro uncertainties such as auto tariffs, suspended its full-year revenue projections in May.
As InvestorsObserver reported, automakers are considering aggressive steps to mitigate the economic impact of President Trump’s proposed auto tariffs, adding further uncertainty to the industry.
Another persistent weakness is the subscription and dealer side of the business, where the company’s core dealer customer count has shown signs of plateauing.
Cars.com’s fortunes ultimately rise and fall with activity in the broader auto market. High vehicle prices, elevated interest rates, falling used-car values, and inconsistent inventory levels have created a difficult environment for both consumers and dealers.