After months of uncertainty, the auto finance engine is revving again. TransUnion reports 5.2% year-over-year growth in auto loan originations in Q3 2025—a notable rebound driven by easing interest rates and steadier inventory levels.
What they’re saying: “The auto financing market continues to chug along,” Satyan Merchant, senior vice president of auto at TransUnion, tells Car Dealership Guy. “We saw pretty healthy growth in originations, fueled by a little bit of relief in interest rates and improved inventory.”
Satyan Merchant
A big piece of that growth came from EV leasing. Nearly 60% of new EV originations were leases, thanks to the now-expired federal tax credit that allowed consumers to claim the incentive regardless of income limits.
“We saw early signs of consumers rushing out to get their EVs before the tax credit expired,” Merchant said.
Meanwhile, monthly payments are creeping up again after several stable quarters. The average new-vehicle payment rose around $20 year over year to $769, while used-vehicle payments also increased as elevated prices lingered.
“Between 2023 and 2024, payments barely moved—only about $5,” Merchant said. “But from 2024 to 2025, they went up more materially.”
What dealers face: At first glance, it looks like a healthy market—but affordability cracks are widening beneath the surface.
Prime and super-prime buyers are sustaining the bulk of demand, with super-prime originations up 8.4% year over year, while subprime loans rose 8.8%. That’s a sign of two very different realities: well-qualified consumers absorbing higher prices and financially stretched buyers paying over $500 a month for used cars that haven’t dropped in cost.
Even as overall delinquency rates remain flat—“basically negligibly up,” Merchant said— they’re still at elevated levels compared to pre-pandemic norms. “Some consumers are in great shape and buying more expensive vehicles,” he noted. “Others are being stretched.”
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What to do: Merchant says the key for F&I leaders and finance directors is staying proactive, not reactive:
Diversify lender relationships. “Credit unions are in a great position right now,” Merchant said. “They react fastest to Fed rate cuts and pass that on to consumers.” Their deposit-funded model gives them the lowest cost of capital, allowing them to offer competitive rates just as national banks are tightening.
Clean up CRM data. “Know who your consumer is—and reach them before they think about buying,” Merchant said. Dealers who keep contact data fresh can flag lease expirations or preapproval opportunities before customers drift elsewhere.
Push prequalification. “Get ahead of it,” he said. “Let a consumer know what their monthly payment could look like before they walk in.” It builds confidence and saves time on deals that might otherwise die in the box.
The big picture: The broader credit picture remains stable, but operating costs continue to climb. Insurance premiums are up 56% since 2020, while maintenance costs have risen 42%, according to Bureau of Labor Statistics data cited by Merchant. Those pressures feed directly into the monthly affordability equation.
Still, dealers have room to maneuver.
“Interest rates are roughly stable—they’re not going up,” Merchant said. “That’s a positive signal that’s creating stability and confidence in the market.”
In other words, financing may be steady—but the smartest dealers will use that stability as a window to tighten processes, strengthen lender ties, and get ahead of the next affordability squeeze.
“People need cars,” Merchant said. “The question is who’s ready to help them afford one.”
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