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Welcome to The Breakdown, an analysis of auto retail’s top trends, moves, and insights—in under 5 minutes.
Every day, it seems a new chart or headline suggests that the auto lending market is on the verge of collapse.
And each uptick in delinquencies, spike in repos, or uptick in interest rates has created a steady drumbeat of warning signs…
Each one the next “canary in the coal mine.”
Some of that concern is rooted in real data. But a lot of it isn’t.
So today, we’ll undercut much of the hysteria by breaking down three auto finance trends dealers are hearing right now; focusing on what’s real, what’s noise, and how the lending market is actually behaving between the lines.
Even at record levels in subprime, delinquencies are not causing a systemic crisis.
Auto loan delinquencies are undeniably ugly in the subprime cohort. And the 30‑, 60‑, 90‑ and 120‑plus‑day DQ buckets on subprime loans are either at, or near, series highs in many datasets.
Like this 60-day auto ABS DQ graph from Fitch Ratings:
These households likely stretched into cars during or just after the pandemic run‑up, and they are now, their monthly payments are colliding with elevated insurance rates, rising prices, and higher living costs.
However, according to Experian’s latest State of the Automotive Finance Market report, prime auto loans outnumber subprime ones by 4:1.
And prime loan performance is boring in the best way. Delinquency and loss rates for prime paper are still within historical norms.
“We are a little bit concerned about where delinquencies and write‑offs are going…” Moody’s Analytics’ Mike Brisson told me. “We're still not really sure where “equilibrium” delinquency should be… If we don't see banks taking big losses on their balance sheets because of the current level of delinquencies and write‑offs, then the industry is going to be all right.”
The good news is, the conversion rate from delinquency to charge-off is relatively muted, which suggests that lenders and borrowers are taking more steps to attempt and "cure" the loan.
Big picture: Defaults follow job losses. And unless the labor market rolls over hard, auto delinquencies remain a symptom of existing inequality and affordability issues, not the trigger for a broader downturn.
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Buyers are stretched on payment, but looser credit access is keeping inventory turning.
Buyers are absolutely reaching to make their car payments work.
According to Edmunds, 84‑month or longer loans made up 20.8% of financed new‑car purchases in Q4 2025, only a hair below 22% in Q3 and well above 17.9% in Q4 2024.
And despite average interest rates slowly creeping down, that’s roughly one in five new‑car buyers signing up for a seven‑year note on a depreciating asset.
So, does that mean the broader auto loan book is trash? Not really.
In fact, the Dealertrack Credit Availability Index reached its best level since October 2022, driven mostly by spread compression between the average contract rate and the 5-year Treasury yield.
Via Cox Automotive
That’s finance speak for better consumer pricing on loans.
On top of that, the subprime share of loan approval dipped slightly month‑over‑month (14.3% → 14.1%) but is up ~230 bps year‑over‑year, which tells us:
Lenders have reopened the door somewhat to riskier borrowers.
Yet, they’re not accelerating subprime exposure quarter‑to‑quarter into a wall.
Big picture: Lenders are actively refining their risk models for a more competitive, not desperate, market.
The new car loan interest tax deduction won’t fix vehicle affordability.
In broad strokes, new car buyers can write-off up to $10,000 of interest per year if they meet the criteria.
For a middle‑income buyer financing a low‑$30K at today’s rates, that can easily knock a few hundred dollars off their tax bill in the first year.
But buyers live in the monthly payment, and a tax break that shows up once a year, is psychologically distant from an “on the hood” discount.
The structure is also limited to new, U.S.-assembled vehicles and subject to a bunch of restrictions that could limit budget‑constrained shoppers.
“In terms of increasing total sales, I think the benefit is marginal—very small. However, for the individual consumer who qualifies, there’s definitely a positive. You can write that interest off,” Brisson said. I just don't think it's going to materially impact those immediate spending decisions.”
Mike Brisson
Moody’s Analytics
Big picture: A defined band of middle‑income buyers of qualifying new U.S.-built vehicles will absolutely get some relief, and dealers will market the hell out of it. But it’s far more likely to function as a patriotic talking point instead of a closing tool on deals.
What’s next:
None of this makes the current environment “easy” for dealers, lenders, or consumers. But Brisson told me, while the economy can always turn down, his baseline forecast still signals no formal recession and modest growth picking up in the back half of 2026. If that’s how it plays out, today’s delinquency charts, stretched terms, and tax breaks are best read as evidence of a long, uneven affordability squeeze rather than proof that the entire auto finance system is in dire straits.
Missed yesterday’s episode of Daily Dealer Live?
Presented by:
Dyjak/York on PARTS Act, Nens on buyer privacy, Johnson on EOS gains
Featured guests:
Charlie Dyjak, Senior Manager of Legislative Affairs at NADA
Greg York, President and CEO of Vann York Auto Group
Sherryl Nens, SVP Head of U.S. Dealer Sales at Privacy4cars
Josh Johnson, CEO of Don Johnson Auto Group
