Delinquency just hit a 32-year record. Everyone is calling it a credit problem. The data says it is a loan-structure problem, and the difference is everything.
Subprime auto 60+ day delinquency, and the loss behind it, are both at post-pandemic peaks. But look at the last box.
90% of negative-equity loans now run 72+ months. The average is 77. A 77-month note amortizes slower than the car depreciates, so the borrower is underwater straight through the window where defaults cluster.
If this were only weaker borrowers, defaults would rise but recoveries would hold. Instead recoveries are collapsing. That only happens when the collateral was never worth the loan.
When a 77-month loan on an old car fails at month 30, the lender eats 63 cents on every dollar. The term wrote the loss in on day one.
Fitch Ratings subprime auto ABS index (via Auto Remarketing, May 2026): 60+ DPD 6.90% Jan 2026 (record, vs 6.45% yr ago); annualized net loss 9.81%; recoveries 37.0% TTM vs 43.73% pre-pandemic; prime 60+ DPD 0.42%.
Edmunds Q1 2026 insights: 30.9% of trade-ins underwater; average negative equity $7,183 (+42% in 5 yrs); 90.2% of negative-equity loans 72+ months, 43% at 84 months, average term 77.4 months; average underwater trade-in age 4.3 years; 26% roll more than $10,000.
The balance-versus-value chart is illustrative of the structure, not a per-loan plot. Subprime-vs-prime ratio (16.4x) computed from the two cited DPD figures. Loss-given-default (63%) is the complement of the 37% recovery rate. Independent analysis, not affiliated with or representing any employer.