Auto lenders increasingly originated loans for below-prime borrowers through the second quarter of the year, according to TransUnion.
Driving the news: TransUnion's Q3 Credit Industry Insights Report found second-quarter originations at 6.8 million, up 100,000 from the same period in 2025 and 400,000 above the 2024 total.
While originations increased, total auto accounts on the books fell roughly 800,000 year over year to 79.4 million.
The amount on loan is $1.65 trillion, up 2.1% year over year.
Loan amounts increase: Higher vehicle prices pushed the amount financed to $44,503 on new vehicle loans, an increase of almost $1,500 from August 2025, while payments were at an average of $788.
Used vehicle loan volume rose $1,053 to $28,026, with the average payment at $551.
Changing borrower: Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion, told CDG News that much of the growth in originations was with below-prime consumers.
In fact, subprime originations grew by 9.8% in the past year.
Most other segments were under 1%.
“We saw growth in every risk segment, super prime all the way to subprime, and everywhere in between,” Merchant said. “Some of that growth was very modest, like 0.3% year over year. But the subprime was almost 10%.”
Reasons for the subprime growth: Merchant credited the growth in the subprime originations to three factors.
Leading off, subprime customers needed a vehicle to get to work and participate in an economy with unemployment around 4%.
The second part is the sector catching back up after price escalations following the pandemic caused added affordability issues.
The last piece, Merchant mentioned, was lenders adjusting their risk models to underwrite loans with fewer defaults and lower delinquency rates.
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“Lenders are more comfortable lending in the space of the below-prime consumer, and the portfolio delinquencies are very stable,” Merchant said. “I think that's a really good sign we see in our most recent report: 1.41% delinquency overall, that's actually two basis points down year over year. It's the first time since 2021 that the delinquency has come down. So we've got lenders who've recalibrated and are more confident in their risk modeling and their risk selection. We've got vehicles available, although I don't want to gloss over affordability… It's still expensive. It's just that the rate of increase has flattened out on the price of vehicles. And then, of course, the consumer is still employed, still needs a vehicle, still participating in the economy.”
Top end still buying: Customers in the top tiers, prime and super prime, are still buying vehicles, but at a lower rate, 0.5%.
Merchant said the tariffs and expiring EV credits pulled many of those customers with discretionary income into the market in 2025.
“Last year was a good year in that the higher risk tier, the pull-forward demand, the consumer who could buy the car or the vehicle went out and did it,” Merchant said. “And so now, they're not doing it again a year later.”
Bottom line: With lenders taking on more subprime originations, there are added opportunities for dealers to work with an expanded pool of customers. Merchant suggests dealers use some of the data tools being used by lenders to score applicants and also identify possible fraudulent applications.
“Lenders are more willing to partner with dealers who take a good stance in rooting out fraud, whether it’s fraud with income, fraud with ID, etc.,” Merchant said. “There are a lot of ways that a dealer can stay aligned with their lender partners.”
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