Car purchases are driving Americans into unprecedented levels of auto debt, according to a recent report.

Americans owe $1.66 trillion in car-related debt, the Consumer Federation of America found. That amount is nearly equal to Spain’s entire economy and amounts to roughly 6% of the United States’ GDP.

And in Miami, where residents spend more on transportation than people in any other major U.S. metro area and are increasingly strapped for cash, that dynamic could be especially troubling.

Part of the issue is that cars are more expensive than ever. The average new car sold for just north of $50,000 in September, according to Kelley Blue Book, up nearly 30% from 2019.

But since many Americans lack access to reliable public transportation, “cars aren’t an option, they’re a necessity,” especially for working adults, said Howard Dvorkin, chairman of the Fort Lauderdale-based company Debt.com.

That necessity is pushing many to take on debt they can’t truly afford.

The Federation’s report found that annual car repossessions and loan default rates are at their highest since the years during and immediately after the Great Recession — a troubling indicator that U.S. households are under intense financial strain, said Erin Witte, the organization’s director of consumer protection.

Dealer add-ons increase car prices

Repos and defaults have risen as prices have increased. But what, exactly, is driving up car prices?

They’ve remained high since the supply-chain bottlenecks of the COVID era. And Trump’s tariffs certainly haven’t helped, said Dvorkin. But predatory selling practices among dealers are among the chief culprits.

For one, it can take hours for the everyday person just to figure out a car’s price. The Federal Trade Commission found the average buyer spends 15 hours on a car purchase — and most of that is spent on pricing. The result is often a confusing, Byzantine car-buying process that wears down consumers and leaves them vulnerable to accepting unnecessary add-ons.

“A dealership might charge you $1,000 for a VIN etching,” said Witte. “But how much does a VIN etching actually cost?”

Packing car sales with “worthless, overpriced add-ons” — like many protections against damage to tires, keys and fabrics — can raise the vehicle’s price by hundreds, sometimes thousands, of dollars, the Federation’s report found.

“I would submit, probably almost all of [those add-ons] are unnecessary, and all they do is make buying a car more expensive,” said Witte. “The dealers go through all sorts of nefarious tactics to make sure that they’re tacked on because they make a lot of money from that.”

Inflated interest rates also balloon car costs. A 2023 study out of MIT showed that nearly 80% of auto loans to consumers with credit scores above 720 — prime scores — had inflated interest rates.

And that figure’s even higher for those with worse credit.

Those consumers — those with less money or poorer credit — are now being sold seven-year auto loans rather than five-year ones, Dvorkin pointed out, making it easier to take on debt for otherwise unaffordable cars.

All those practices coincide with a rollback in enforcement by the Consumer Financial Protection Bureau, a federal agency tasked with protecting buyers from abusive financial practices. The Trump administration has worked to gut the organization.

As a result, said Witte, “there’s no cop on the beat.”

‘Canary in the coal mine’

And so, increasingly, vulnerable buyers are getting trapped in auto debt they can’t afford. Now they’re beginning to default.

In greater Miami, 10% of auto borrowers are in severely delinquency, meaning they’re at least 90 days late on their debt payments. That’s nearly a percentage point higher than the national average, according to the Federal Reserve Bank of Philadelphia.

That’s also the highest level since the pandemic.

Nationwide, more than 3% of auto loans were in default last year, according to auto data firm Cox Automotive — the most since 2011 and a 43% jump from 2022. That’s led to a dramatic increase in repossessions. More than 1.7 million cars were repossessed last year, the most in a single year since 2009.

Witte sees those figures as a “canary in the coal mine” for financial distress among American households.

“These are families who need their cars to get their kids to school, to doctor appointments,” or, most importantly, to their jobs, she said.

Because people have to get to work, they tend to prioritize auto payments over most other expenses, Witte said. When buyers are “unable to afford their car payments, that usually means that they have stretched everything else in their budget.”

As the saying goes, added Witte: “You can sleep in your car, but you can’t drive your house.”

(This story was produced with financial support from supporters including The Green Family Foundation Trust and Ken O’Keefe, in partnership with Journalism Funding Partners. The Miami Herald maintains full editorial control of this work.)

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