Americans are struggling to pay their bills, and the collapse of a major auto lender shows just how bad things are getting.
Tricolor Holdings, a Dallas-based used-car dealer that made loans to people with poor credit, filed for bankruptcy on Wednesday. The company operated 65 dealerships across six states and specialized in selling cars to Spanish-speaking buyers who couldn’t get loans anywhere else.
The company’s failure comes at a time when millions of Americans can’t keep up with their car payments. Right now, 6.6% of people with bad credit are at least 60 days behind on their auto loans — the highest level since tracking began according to an Axios roundup [1]. Even people with good credit are falling behind more often than they did last year.
Tricolor’s bankruptcy didn’t happen overnight. The company, which had been praised by major investors like BlackRock for helping underserved communities, was actually in deep trouble.
Fifth Third Bank discovered what it called “fraudulent activity” at Tricolor and took a hit of up to $200 million investigative reporting from Barron’s revealed [2]. JPMorgan Chase faces similar losses, with about $200 million at risk [2]. Origin Bank has another $30 million tied up with the failed company [2].
The timing couldn’t be worse for American families. Total household debt has hit a record $18.39 trillion, and Americans now spend about 11% of their income just on debt payments according to the Federal Reserve Banks of New York and St. Louis [3], [4] . That’s money that can’t go toward groceries, gas, or saving for emergencies.
The auto loan crisis is hitting families especially hard. Car prices are sitting just under $50,000 on average, while loan rates have climbed above 9% for new cars and almost 14% for used ones [1]. Add in car insurance rates that are up 19% from last year, and many families simply can’t afford their vehicles anymore [1].
Young people are suffering the most. Among Gen Z borrowers with auto loans, 7.5% are behind on payments — the highest of any age group according to LendingTree [5]. Mississippi leads the nation with nearly 10% of auto loan borrowers having at least one late payment, followed by Louisiana and Georgia [5].
The problem goes beyond just car loans. Credit card debt has exploded to $1.21 trillion, with the average interest rate hitting 22.25% [6]. Student loan problems are back too, with 7.7% of borrowers falling seriously behind after pandemic protections ended according to KPMG research [7].
Missing a car payment starts a dangerous cycle. After 30 days, your lender reports you to credit bureaus, which damages your credit score and makes future borrowing more expensive. You’ll also face late fees that make catching up even harder.
If you hit 90 days late, you’re in default. Your car can be repossessed, you lose all the money you’ve already paid, and you still might owe thousands more. Last year alone, Cox Automotive reported that 1.73 million vehicles were repossessed — the highest number since 2009 [8].
Read more: Rich, young Americans are ditching stocks — here are the alternative assets they’re banking on instead
If you’re struggling with car payments, don’t wait until it’s too late. Contact your lender immediately to discuss options. Many will work with you on a payment plan or temporary reduction rather than lose money on a repossession.
Consider these emergency steps if you’re falling behind:
Use your emergency fund if you have one — this is exactly what it’s for. Ask family or friends for a short-term loan, but create a clear repayment plan. Look into refinancing your auto loan for a longer term or lower rate to reduce monthly payments.
For those still managing their payments, now is the time to prepare. Build an emergency fund, even if it’s just $500 to start. Pay down high-interest credit cards as fast as possible. And think twice before taking on new debt, especially with rates this high.
Tricolor’s collapse isn’t just about one company. When auto lenders fail and millions of Americans can’t pay their bills, it signals trouble for the whole economy. Lenders are already getting pickier about who they’ll approve for loans, which means buying a car will get even harder.
The Federal Reserve might cut interest rates later this year, which could provide some relief. But with debt levels at record highs and more people falling behind every month, families need to take action now to protect themselves.
Don’t become another statistic. If you’re struggling with any debt — whether it’s your car, credit cards, or student loans — reach out for help today. The sooner you act, the more options you’ll have. Remember, even people with steady jobs and decent credit are having trouble keeping up. You’re not alone, and there’s no shame in needing help during these tough times. What matters is taking action before small problems become big ones.
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[1]. Axios. “Americans are behind on car payments at a record level”
[2]. Barron’s. “Tricolor Files for Bankruptcy. The Auto Lender Was Once an ESG Favorite.”
[3]. Federal Reserve Bank of New York. “Household Debt Growth Remains Steady; Auto Loan Originations Pick Up”
[4]. Federal Reserve Bank of St. Louis. “Household Debt Service Payments as a Percent of Disposable Personal Income”
[5]. LendingTree. “5.1% of Americans With Auto Loans Are Delinquent; Gen Zers Hit Hardest”
[6]. LendingTree. “2025 Credit Card Debt Statistics”
[7]. KPMG. “Household debt is reverting to pre-pandemic levels”
[8]. Cox Automotive. “Estimated defaults and default rate on autoloans”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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