US car repossessions are climbing. Should British drivers worry?
Repossessions in the US are rising, and they’re one more sign of households under strain. Many American borrowers are dealing with high vehicle prices, expensive finance and bigger monthly payments, and auto loan delinquencies are still above pre-pandemic levels. The obvious question is whether Britain is heading the same way.
What’s going wrong in the US
Americans owed about $1.71 trillion in auto debt in the second quarter of 2026, according to the New York Fed. The share of balances moving into serious delinquency hit 3.0%, against roughly 2.4% before the pandemic.
Prices explain a lot of it. Plenty of people bought during the supply shortage, when cars cost far more than usual, and then financed them as interest rates climbed. Longer loan terms kept monthly payments down, but they also keep borrowers in debt for longer and make it easy to owe more than the car is worth.
The same pressures on this side of the Atlantic
The UK market works differently, but the squeeze will feel familiar. Vehicle prices jumped after the pandemic, higher rates made new finance deals more expensive, and households are also absorbing bigger bills for housing, food, energy and insurance. A monthly payment that looked comfortable a couple of years ago can now be a real strain.
Britain also leans heavily on Personal Contract Purchase (PCP) and Hire Purchase. Both let drivers spread the cost of a car over several years, which is exactly why they’re so popular, but they only work while income stays steady. If wages fall or another expense lands, the payment is still due.
Why repossession works differently here
Where the two countries really differ is in what happens when someone falls behind. FCA rules require lenders to treat customers in or approaching arrears with forbearance and due consideration. In practice that can mean reducing or suspending interest and charges, changing the repayment arrangement, or simply giving the customer more time to pay. Repossession is supposed to be a last resort, used only after other reasonable options have been tried.
That doesn’t make losing your car impossible. If payments stay unpaid and no workable arrangement can be reached, a lender can terminate the agreement and recover the vehicle. The difference is that the system is built to step in earlier.
A separate scandal hanging over UK car finance
The industry is also dealing with a different problem altogether. The FCA has introduced a compensation scheme for certain motor finance agreements taken out between 2007 and 2024, where customers may not have been properly told about commissions or other important terms. The scheme has faced legal challenges, and parts of it are currently suspended.
It has nothing to do with arrears or repossessions, but it has put a harsh light on how car finance was sold in the first place.
Why a car loan is a warning sign
My view is that the UK’s protections are real but easy to overrate. Forbearance rules only help people who actually pick up the phone, and many stressed borrowers wait until they’re deep in trouble before they do.
Car finance is also worth watching for reasons beyond cars. For most households a vehicle is how they get to work, so people cut almost everything else before they miss that payment. When car arrears start rising, the squeeze is usually well advanced, and credit cards, personal loans and other consumer debt tend to follow.
So, could the UK follow the US?
I wouldn’t call the US a preview of Britain, but I wouldn’t wave it away either. A lot depends on interest rates, wages, employment and the price of new and used cars. If borrowing costs keep easing and incomes improve, most borrowers will be fine. If unemployment rises while living costs stay high, car finance arrears will be one of the first places it shows up.