Inside the Quiet Auto Loan Debt Bubble.

Americans now owe $1.685 trillion in auto loan debt, making car loans the second largest category of consumer debt in the country, trailing only mortgages.

​While the headline numbers show record high average payments of $770 for new vehicles, the most concerning story is happening under the surface. A quiet debt bubble may be forming, driven by how heavily the middle market is getting squeezed.

​Look at the payment data by credit score. Working-class buyers in the nonprime tier (601 to 660 credit score) are carrying an average new car payment of $811 per month. That is higher than the average payment for prime and "super prime" borrowers.

When nonprime buyers are forced into luxury-tier monthly payments just to secure basic transport, something has to break, and we're already seeing the impact in the credit data: 90-day auto loan delinquencies surged by 12.2% year-over-year, climbing to 5.6% of outstanding debt.

Traditional buying rules are crumbling under this pressure and we may be watching the creation of an auto loan debt bubble.

Are previously well intentioned, disciplined buyers abandoning prudent buying decisions that were once the bedrock of prime lending? Does the classic 20/4/10 rule (20% down, 4-year term, payment under 10% of gross income) even exist anymore?

When the average new loan sits at $43,925, loan terms stretch past 69 months, and negative equity gets continuously rolled over into new contracts, how can regular buyers possibly stick to healthy financial guidelines? Or have stretched terms and burying negative equity simply become the standard way to hide how unaffordable vehicles have truly become?