The September collapse of subprime auto lender Tricolor rattled investors, but warning signs had been building for months as stress mounted across the subprime credit market.
Tricolor Auto Group, founded in 2007 and known for serving Hispanic and immigrant communities with limited credit history, filed for Chapter 7 bankruptcy, leaving Fifth Third Bancorp facing a potential $200 million loss from what it called “alleged fraudulent activity” tied to an unnamed borrower, now identified as Tricolor.
JPMorgan and Barclays have also been reported to have potential exposure.
At the time of its failure, Tricolor operated dozens of dealerships across multiple states and had a large auto-finance portfolio.
While fraud allegations may have hastened the downfall, Tricolor’s implosion underscores broader pressures on subprime auto finance, where delinquencies are climbing to crisis levels.
Data from Fitch Ratings show a sharp rise in auto loan delinquencies in recent years, defined as borrowers more than 60 days late on payments.
Prime auto loans remain stable, with delinquency rates below 2%. However, subprime delinquencies, after dipping during the pandemic stimulus period, have surged back toward 10%.
Although still below the 2008 peak, today’s levels mark the highest sustained stress since that crisis. Analysts point to higher interest rates, inflation cutting into household budgets, and elevated used-car prices as key drivers of the strain.
“This collapse didn’t happen in isolation. Just before Tricolor failed, First Brands Group, a large auto parts supplier, filed for bankruptcy,” wrote market commentator Stock Market News.
Tricolor, one of the biggest subprime auto lenders, collapsed in September. The company focused on low-income and Hispanic families, offering loans with sky-high interest rates. By August, delinquencies jumped to 9.3%, the highest since 2008.
undefined StockMarket.News (@_Investinq) September 25, 2025
At the same time, Tricolor faced… pic.twitter.com/OhcSuN68VP
More troubling, rising subprime auto delinquencies are often an early warning sign of household financial distress. These borrowers have the thinnest financial cushions, making them especially vulnerable.
The trend adds to growing evidence that the health of the American consumer is resting on shaky ground.
From car loans to credit cards, financial strain continues to spread
As the total value of U.S. auto loans climbs toward $1.7 trillion, signs are mounting that many Americans are being stretched by their car payments. However, the strain doesn’t stop there.
The car market bubble is bursting:
undefined The Kobeissi Letter (@KobeissiLetter) September 7, 2025
Subprime auto loan delinquency rates have now surpassed 5% for the first time in history.
The 60-day delinquency rate for subprime auto loans has more than DOUBLED over the last 3 years.
Delinquency rates are now ~1.5 percentage points… pic.twitter.com/JQgYfMJiXv
Credit card debt is also piling up. In the second quarter, balances hit a record $1.21 trillion, up $27 billion from the prior quarter, according to the New York Fed.
Late and missed payments are also rising, with nearly 7% of balances slipping into delinquency over the past year, the data showed.
“Credit card debt is the silent killer,” warned Peter Mallouk, CEO of wealth management firm Creative Planning. “Over 12% of balances are 90+ days delinquent — near the highest level in 14 years — with interest rates north of 21%.”
Credit card debt is the silent killer. Over 12% of balances are 90+ days delinquent – near the highest in 14 years - with interest rates north of 21%. Nothing destroys wealth faster. pic.twitter.com/iyuJ8q5YIi
undefined Peter Mallouk (@PeterMallouk) August 12, 2025
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