The company declared bankruptcy and the new owners say they're not obligated to continue paying past winners

Tricolor Holdings sold used cars to customers with poor or no credit; it's not the only trouble spot in the economic picture

• Dallas-based Tricolor Holdings, once the nations seventh-largest independent used car chain, has filed for Chapter 7 bankruptcy.

• The company specialized in selling cars to customers with poor or no credit, often at interest rates above 20%.

• Its collapse leaves borrowers, banks, and investors facing heavy financial losses amid rising national auto loan debt.

The doors of one of Americas biggest independent used car chains have suddenly closed, leaving banks and borrowers tangled in the fallout. Dallas-based Tricolor Holdings, once the seventh-largest used car dealer in the country, has filed for Chapter 7 bankruptcya liquidation move that signals the end of its business.

For years, Tricolor carved out a niche selling refurbished vehicles to customers with poor or no credit, focusing largely on Hispanic communities in Texas, Arizona, and California. The company leaned heavily on subprime lending, issuing loans with interest rates often exceeding 20%more than double the national average for used car loans. That strategy opened doors for families otherwise shut out of the auto market, but it also left many struggling to keep up with payments.

In 2023 alone, Tricolor issued more than $1 billion in auto loans, many tied to undocumented immigrants, according to bond rating reports. As defaults mounted, the companys risky but once-profitable model began to unravel. Borrowers unable to meet high monthly payments frequently returned vehicles or fell into default, leaving the lender exposed to mounting losses.

Troubles grew recently

Signs of trouble accelerated in recent weeks. Tricolor furloughed staff, shut down its website, and executives quietly erased their LinkedIn profiles. Bankruptcy filings this week confirmed what many insiders already suspected: the companys collapse was imminent.

The damage stretches far beyond used car lots in the Southwest. JPMorgan Chase, Barclays, and Fifth Third Bancorp are among the major banks facing exposure to Tricolors debt. Fifth Third alone disclosed a $200 million hit tied to what it called alleged external fraudulent activity, adding that it is cooperating with law enforcement.

The timing could hardly be worse. With the average new car now costing nearly $50,000about $11,000 more than in 2019American households are straining under record-high auto loan payments. National auto loan debt reached $1.66 trillion last year, surpassing student loan totals and trailing only mortgages as the countrys heaviest consumer liability. More than 5% of borrowers are now delinquent, the highest rate in years.

What began as a lifeline for thousands of families in Hispanic and immigrant communities has now grown into a financial crisis that could ripple through Wall Street. Tricolors downfall underscores the fragility of subprime lending in an era of inflation, high interest rates, and ballooning consumer debt.

It's part of a larger picture

Tricolor's troubles aren't unique and illustrate a growing but disturbing trend:Consumers are struggling with both car payments and credit card debt, with delinquency rates elevated compared to recent years.

For credit cards, the 90-day delinquency rate showed quarter-over-quarter growth of 2.1% between the first quarter of 2024 and the first quarter of 2025, though this represents a slowdown from the 3.6% growth rate seen in the prior period. The trend of rising credit card delinquencies has been ongoing for several years.

The auto loan situation is particularly concerning. Americans are behind on car payments at a record level, with subprime borrowers especially struggling. Even prime borrowers are experiencing increased difficulties, with 60-day delinquencies rising to 0.39% in January 2025, up from 0.35% in January 2024, according to the St. Louis Fed.

The Federal Reserve Bank of New York's recent reports consistently highlight that delinquency transition rates remain elevated for both auto loans and credit cards, indicating this is an ongoing trend rather than a temporary spike.

However, there are some signs that the pace of deterioration may be moderating. TransUnion's 2025 forecast projects a slowdown in growth for both credit card balance increases and delinquency gains by the end of 2025, suggesting the worst of the increases may be behind us, though delinquency levels remain elevated overall.

The combination of high interest rates, inflation pressures on household budgets, and increased borrowing costs appears to be putting significant strain on consumer finances across both secured (auto) and unsecured (credit card) debt categories.

175,000 more homes wee underwater in the latest report

By Truman Lewis of ConsumerAffairs

• Cotality report shows average U.S. homeowner holds $307,000 in equity

• National equity fell by $141.5 billion year over year, with 175,000 more homes underwater

• Northeast homeowners see gains while Florida, D.C., and Montana face steepest losses

Homeowner equity gains have slowed across the United States, with more borrowers falling into negative equity as home price growth stalls, according to a new report from property analytics firm Cotality.

The Homeowner Equity Report for the second quarter of 2025 shows the average U.S. borrower with a mortgage holds about $307,000 in equity still the third highest figure in history. Thats up $124,000 compared with the start of the pandemic in 2020. But overall borrower equity slipped by $141.5 billion, or 0.8%, year over year, bringing total U.S. net equity to $17.5 trillion.

Home prices this year have experienced the slowest rate of growth since the Great Financial Crisis of 2008, said Cotality Chief Economist Dr. Selma Hepp. As appreciation remains modest and even declines in some markets, home equity accumulation is projected to follow suit.

Year over year, homeowners lost an average of $9,200 in equity, the report found. That pushed the share of mortgaged homes in negative equity from 1.7% to 2%, representing 175,000 more households underwater. Still, compared with the first quarter of 2025, negative equity actually dropped by 3.3% thanks to seasonal spring price increases.

What's next?

The outlook remains mixed: 144,000 homes could regain equity if prices rise 5%, while 242,000 could fall underwater if prices decline 5%. Cotalitys forecast calls for a more modest 3% increase in home prices by June 2026.

Regional patterns are stark. Homeowners in the Northeast continue to see gains, led by Connecticut ($37,400), New Jersey ($36,200), and Rhode Island ($31,200). By contrast, 32 states posted losses, with the biggest drops in the District of Columbia ($-34,400), Florida ($-32,100), and Montana ($-26,900).

Metro-level data shows Las Vegas, Los Angeles, and San Francisco are among the least affected markets. In contrast, areas such as McAllen, Texas; Shreveport, Louisiana; and Cape Coral and Ocala, Florida have seen sharp increases in negative equity, partly due to falling home prices and the impact of natural disasters.

The next Homeowner Equity Report is scheduled for release December 11, 2025.

What it means for homeowners

• Equity cushion shrinking: Many borrowers still hold significant equity, but year-over-year declines show that safety net is narrowing in some markets.

• Risk of going underwater: With more homes slipping into negative equity, homeowners planning to sell or refinance may face challenges if prices soften further.

• Regional divide: Northeastern states continue to deliver strong equity gains, while parts of Florida and the Mountain West are seeing steep losses.

Negative equity explained

What it is:
Negative equity, often called being underwater, happens when a home is worth less than the balance owed on its mortgage. For example, if a home is valued at $250,000 but the owner still owes $270,000, that homeowner is $20,000 underwater.

Why it matters:

• Limits refinancing options, since lenders may be unwilling to approve new loans on an overvalued property

• Makes it harder to sell a home without taking a loss

• Can trap homeowners in place if they need to move for work or family reasons

What homeowners can do:

• Stay put: Negative equity isnt always a problem if you plan to stay in your home and keep making payments

• Watch the market: Modest home price gains can restore equity over time

• Avoid risky loans: Be cautious with cash-out refinances or home equity loans if values are falling

• Seek help if needed: Programs from lenders or government agencies may offer relief for underwater borrowers in hardship situations

The bottom line:
Negative equity levels remain relatively low by historic standards, but increases in certain regions highlight risks if home prices dip further.

The measure targets "shrinkflation," selling smaller products for the same price