Recent corporate failures among Tricolor, a used car dealer and sub-prime auto lender, and First Brands, an auto parts supplier, have raised concerns within the finance industry. These collapses come nearly 20 years after the 2008 financial crisis, which was significantly influenced by issues in the sub-prime mortgage market.
Jamie Dimon, CEO of JPMorgan Chase, recently highlighted the potential for more failures, noting a $170 million charge related to Tricolor’s bankruptcy. Tricolor’s financial issues have raised alarms, particularly as the auto lending market reveals signs of strain, leading to an uptick in repossession business. George Badeen, a recovery business operator in Detroit, reported increased workloads related to vehicle repossessions, indicating that sub-prime lenders are tightening their financing practices.
Tricolor received court approval for $500 million in rescue financing, although concerns were expressed regarding the potential risk of “lending good money after bad.” The broader implications of these issues in the auto loan market include potential signals about the financial health of lower-income households and their ability to prioritize auto payments.
An estimated 100 million Americans hold auto loans, making this sector the third-largest consumer credit market in the U.S. The recent history of rising car prices during the COVID-19 pandemic, coupled with inflation and increased interest rates, has strained household budgets. In 2023, car owners were found to be missing payments at unprecedented rates, with repossessions reaching the highest level since 2009.
While repossession efforts are becoming more challenging due to heightened consumer rights awareness and potential confrontations, the future state of the auto loan market remains uncertain. If larger sub-prime lenders experience difficulties, this could lead to broader economic turbulence. Moreover, ongoing issues related to COVID-era healthcare subsidies may further impact borrowers’ financial situations. The unique circumstances surrounding Tricolor’s collapse have prompted caution, but its effects may not necessarily reflect the overall health of the auto lending sector.
Source: https://www.theguardian.com/business/2025/oct/17/us-car-repossessions-economy