Consumer delinquency rates have reached levels not seen since the aftermath of the 2008 financial crisis, alarming investors tracking household credit health.
About 5.2% of auto loan balances were 90 days or more past due as of the fourth quarter of 2025, and credit card balances 90 or more days past due have climbed to 13.1%, according to the New York Federal Reserve‘s first-quarter 2026 Household Debt and Credit Report.
The report is one of the most closely watched gauges of consumer financial stress. But Goldman Sachs argues that the headline delinquency data may be misleading, overstating weakness in some loan categories while hiding a more serious problem elsewhere.
Goldman Sachs says “zombie loans” are inflating the delinquency data
The concern around consumer delinquency rates stems from a measurement problem that Goldman Sachs highlighted in its June 16 Global Markets Daily report.
The headline metric in the New York Fed’s quarterly report includes “severely derogatory” loans, a classification covering debts in foreclosure, in repossession, or charged off by lenders.
When a bank writes off an unpaid credit card balance, it removes the debt from its financial statements and takes the loss.
That charged-off obligation can linger on a borrower’s credit report for years, inflating the aggregate delinquency figures, Goldman’s research noted.
Old and uncollectable debts continue to accumulate inside the same delinquency bucket as loans where borrowers are missing recent payments.
Credit card delinquency on commercial bank balance sheets is at 2.92% for the first quarter of 2026, Goldman’s report indicated.
The headline credit card delinquency rate in the New York Fed report, based on credit bureau data, stood at 13.1% for the same period.
Goldman’s analysts recommended that investors focus on “transition rates,” which track performing loans that newly slip into delinquent status each quarter.
Those transition rates remain well below the levels reached during the Global Financial Crisis, and they have held relatively steady in recent months, Goldman’s report confirmed.
Subprime auto borrowers falling behind at rates surpassing the financial crisis
The stress is much worse among subprime auto borrowers.
Goldman Sachs found that borrowers with credit scores below 620 now have delinquency rates above the peaks seen during the financial crisis.
Vehicle ownership does come with significant costs, VantageScore Chief Economist Rikard Bandebo noted, according to Bloomberg.
Borrowers are often ‘caught off guard’ by high interest rates and the costs associated with keeping a car insured and maintained.
Near-prime auto borrowers with scores between 620 and 719 are approaching their own historical peak delinquency levels as well, the firm’s analysis indicated.
The divergence suggests that auto-lending stress is a vehicle-specific problem rather than a symptom of broader consumer financial weakness.
Rising loan costs and aging vehicles compound the subprime auto debt strain
Goldman Sachs attributed the worsening trend in subprime auto delinquency to three structural forces that have made vehicle ownership increasingly difficult for lower-income households.
The first is the loan-to-value ratios on recently originated auto loans, which have climbed in recent years.
Higher LTVs mean borrowers are financing a larger share of the purchase price with less equity cushion, leaving them more exposed if the vehicle’s resale value drops.
The second is payment-to-income ratios, which remain stubbornly elevated. Larger monthly payments relative to take-home pay leave less room in household budgets for unexpected expenses, Goldman’s research noted.
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The third is the aging of the national vehicle fleet. A growing share of cars on the road are older, which brings higher maintenance and repair costs that push already-stretched borrowers past their financial limits, the report indicated.
The strain shows up clearly at the point of sale. About 30.9% of consumers who traded in a vehicle during the first quarter of 2026 owed more than the trade-in was worth, according to Edmunds’ Q1 2026 Insights Report.
The average negative equity gap reached $7,183, the highest ever recorded for a first quarter and the second-highest quarterly figure on record for American car buyers.
Total outstanding auto loan balances reached $1.685 trillion as of the first quarter of 2026, setting a new all-time high, according to New York Federal Reserve data.
Goldman Sachs holds an underweight position on subprime auto securities
Goldman’s research team used these findings to reinforce a specific investment stance on the subprime auto asset-backed securities market.
The firm remains underweight in that sector, meaning its strategists expect those bonds to underperform their benchmarks, the report confirmed.
Subprime auto asset-backed securities are financial instruments whose cash flows depend on timely monthly payments from borrowers with credit scores below 620.
When those borrowers miss payments at elevated rates, the securities lose value and may eventually suffer credit losses, Goldman’s report explained.
Goldman’s underweight stance on subprime auto asset-backed securities signals where the firm expects further credit losses to surface in the coming quarters.
Transition rates across other consumer loan categories remain the metric Goldman analysts said investors should track for early signs of broader household stress.
For the subprime auto market, however, the deterioration is measurable, concentrated, and still accelerating on Goldman’s preferred measure of consumer distress.
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