The percent of auto loans in serious default rose to the highest level in almost seven years in the last three months of 2018, as consumers with weak credit struggled to make payments despite a strong U.S. economy and tight labor market.

Auto loans delinquent more than 90 days rose to 4.47 percent of the total in the fourth quarter, the highest since the period ended in March 2012, and up from 4.05 percent a year ago, according to Federal Reserve Bank of New York data.

Overall delinquencies rose even as auto lenders shifted business to more creditworthy borrowers, and car loan originations reached $584 billion, the highest level in the Fed’s 19-year history tracking the data.

“Despite auto debt’s increasing quality, its performance has been slowly worsening,” Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed, said in a statement.

"Although rising overall delinquency rates remain below 2010 peak levels, there were over 7 million Americans with auto loans that were 90 or more days delinquent at the end of 2018. That is more than a million more troubled borrowers than there had been at the end of 2010 when the overall delinquency rates were at their worst since auto loans are now more prevalent," Scally said. 

“Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”

The deterioration in subprime auto loans comes as vehicle prices have soared and financing rates have crept higher, making it harder to afford a new car. Consumers paid an average of more than $36,000 for a new vehicle last year, up roughly 3 percent, according to Kelly Blue Book.