Subprime Auto Lender Tricolor Files for Liquidation Amid Financial Struggles

HOUSTON, Texas — Tricolor, a major subprime auto lender focused on serving buyers without social security numbers or credit histories, announced its decision to file for bankruptcy on September 11, 2025. The Houston-based company plans to liquidate its assets rather than continue operations.

This move is significant for many buyers, particularly undocumented immigrants who rely on such financial services. Tricolor’s failure creates challenges not just for these individuals, but also for major banks holding Tricolor’s debt that is secured by loans.

Despite the serious implications of Tricolor’s bankruptcy, experts suggest it will not significantly impact the broader financial services market or lead to a crisis similar to the subprime mortgage collapse in 2008. Pamela Foohey, a law professor at the University of Georgia, noted that subprime auto loans differ significantly from housing loans.

Foohey explained that the auto loan market is much smaller than the mortgage market, only one-eighth its size as per Federal Reserve data. Additionally, auto loans typically are not as heavily leveraged or bundled into securities as mortgages were prior to the last housing crisis.

Tricolor’s auto loans, while also categorized as subprime, are managed differently. With auto loans often resulting in repossessions for defaulting borrowers, lenders like Tricolor expect to recover their losses by reselling the vehicles. Foohey emphasized that this serves as a crucial distinction from the real estate market where reselling can be challenging.

Even though the overall auto market is significant, car values have remained stable or increased lately, contrasting sharply with the housing market before the 2008 crash. Currently, subprime loans make up about 15% of all auto loans, and deep subprime loans, where Tricolor specialized, account for less than 2%.

The rise in car prices has led to increasing monthly payments, with more than 15% of new car payments exceeding $1,000, the highest proportion recorded. Tricolor’s bankruptcy also affects other financial institutions, including JPMorgan Chase and Barclays, as they have invested in the company secured loans.

In a filing, Tricolor revealed its liabilities and assets range between $1 billion and $10 billion. Fifth Third Bank has already reported discovering fraud related to its dealings with Tricolor, indicating the magnitude of the situation.

Tricolor’s bankruptcy may not cause widespread panic among investors as it did in past crises, but it highlights the inherent risks in the subprime lending sector, especially amid rising interest rates and economic uncertainty.