If you’ve lived in America long enough, you’ve seen it: a car dealership with a giant American flag billowing out front, so large it seems to pull at the clouds. For most people here, that image barely registers. It’s just part of the landscape, as ordinary as fast-food signs or freeway exits.
But if you’re new to the country, like me, it’s hard not to notice. There’s something striking about how proudly the flag waves over rows of shiny trucks and sedans, as if patriotism itself were on sale alongside the vehicles. The message feels unmistakable: they’re pieces of the American dream.
That dream was exactly what Matthew Brown, a 51-year-old HVAC contractor from Texas, thought he was buying when he drove out of a Dallas-area Tricolor lot in his “new” Ford F-150, a used pickup that seemed sturdy enough to help rebuild his small business. Less than an hour later, the dashboard lights turned red, the engine started billowing smoke – and his calls to the dealership went unanswered. Within months, the truck was gone, his tools along with it, and Tricolor had stopped responding altogether.
To understand what happened to Brown is to understand Tricolor Holdings, once a fast-growing subprime auto lender built on a simple pitch: “Do you have bad credit? Don’t worry.”
Based in Irving, Texas, Tricolor specialized in serving Latino immigrants, many of them without credit histories or legal documentation. The company offered everything in one place: a used car, a loan and, if payments were missed, a quick repossession.
The model was legal, profitable and popular. Banks such as JPMorgan and Barclays lent Tricolor hundreds of millions of dollars. Wall Street then packaged those subprime car loans into asset-backed securities and sold them to investors seeking higher yields.
When the company collapsed in 2025, investigators found that it had pledged the same vehicles as collateral for multiple loans – a practice known as double-pledging – across nearly 29,000 contracts.
There’s been no shortage of headlines about Tricolor’s downfall. But why does it matter? After all, it’s just one company among many that went under. Why should anyone care? The answer lies not only in how Tricolor operated, but in what it was selling, an idea that runs far deeper than a single dealership.
Why cars matter so much
“Cars are unique to American culture,” said Chad D. Cummings, a financial attorney who’s been watching the subprime collapse unfold. “From the moment automobiles became common, they have been associated with freedom, with individuality.”
You can still see that mythology everywhere: in movies where teenagers get their first car and become adults, in suburbs built around driveways and garages, in families who trade up every few years.
And it’s more than nostalgia. “People in the U.S. sometimes spend as much on cars as on their homes,” Cummings said. “It’s about pride and ego, an almost spiritual need to identify oneself as a unique individual.”
That cultural logic also makes the auto-lending market unusually fragile. When credit tightens, the promise of mobility begins to slip out of reach.
Lending standards grow stricter
Federal Reserve data show that banks are quietly redrawing their boundaries. According to the Senior Loan Officer Opinion Survey, which tracks lending behavior at major U.S. banks, more lenders are tightening credit standards for car buyers with subprime credit scores and raising the minimum down-payments required to qualify for loans.
After a sharp increase through 2023, both measures eased slightly in 2024 and 2025, but they remain above zero, meaning credit conditions are still getting stricter.
For borrowers like Brown, tighter credit can mean losing the very tool that makes work possible. When lenders pull back, the ripple effects land hardest on people who rely on their vehicles to earn a living. Brown had put down $3,500 to secure a truck that was supposed to keep his small business afloat. When the financing unraveled and the vehicle was repossessed, so did his ability to work. Scale that experience across thousands of borrowers, and the picture comes into focus: the promise of mobility is slipping out of reach.
“It’s a repeat in certain aspects of the 2008 housing bubble: loans written for people with no income, no assets, no savings,” Cummings said. The dynamic has shifted from homes to cars, but the challenge remains: underwriting subprime loans has only grown more complex.
The share of subprime auto loans more than 60 days delinquent has climbed to about 6.65 percent in late 2025 — the highest level since the aftermath of the 2008 financial crisis. In contrast, delinquencies among prime borrowers have held steady at roughly 0.6 percent. The widening gap highlights how quickly financial stress is returning to lower-income households and how that strain may soon ripple up to investors.
The Securitization Slowdown
It’s already beginning to affect the volume of bonds backed by car loans, as issuance of new auto asset-backed securities (ABS) requires a steady stream of loans to repackage.
Bloomberg data on U.S. auto ABSs shows issuance volumes hovering near $270 billion in 2025, slightly below last year’s peak. The number of deals has flattened, and the market is increasingly dominated by a few players: JPMorgan, Bank of America, and Barclays now control roughly a quarter of all issuance between them.
As Cummings noted, the problem with subprime car loans is that many were written simply because they could later be packaged into auto-backed securities and resold. When car sales decline, there are fewer loans to securitize – and fewer securities to trade. The same issue applies to commercial mortgage-backed securities, he said.
It’s a familiar cycle: when one market slows, investors look for the next source of momentum. Right now, that momentum comes from artificial intelligence.
“The only thing that is holding the American economy together right now is AI,” Cummings said. If the AI bubble bursts, he warned, the fallout could resemble the 2008 financial crisis. “We’d already be in a correction if not for AI,” he said. The biggest change now is that the Federal Reserve can not lower rates without causing inflation,” he said. “The problem with inflation is that it is permanent. It’s not short-term.”
For Brown, that correction has already come. In July, when Tricolor repossessed the truck he had bought just months earlier, it also took the tools he stored in it and left him stranded hundreds of miles from home. He says he never got the tools back. Now he and his wife share a single car to keep their small business running.
The car, once a symbol of American freedom, has become a barometer of financial fragility.
