Delinquency rates on auto loans increased in August in both the prime and subprime cohorts, according to Morgan Stanley

Consumers with auto loans originated in the past two years are falling behind more frequently compared to those with older loans.

Subprime auto loans from 2023 are struggling the most, impacted by elevated interest rates and high vehicle prices at the time. According to Bloomberg data, about 8.7% of all accounts are at least 30 days past due, 3.2% are 60 days past due, and 1.25% are 90 days delinquent.

What they're saying: "Loans taken out in 2022 and 2023 are, so far, underperforming compared to earlier years, likely because buyers during these years faced higher car prices and were forced to borrow more at higher interest rates," researchers at the New York Fed wrote.

Worth noting: Loss severities in auto-backed securities (the portion of bond value, including unpaid interest, that investors lose in a default) for 2023 subprime loans have been higher than those from 2022. Losses in these two vintages are the highest ever recorded in the subprime category.

Bottom line: Rising delinquency rates, especially among subprime borrowers, signal growing concerns about the financial health of American consumers. The underperformance of newer loans indicates that consumer financial strength may be weakening.