Credit standards in auto lending are looser than they were a year ago, with many lenders now willing to approve riskier borrowers with more precarious loan structures.
The details: According to an internal memo shared with CDG News, Wells Fargo $WFC ( ▼ 0.98% ) Auto has released new, expanded credit guidelines for car dealers participating in its credit expansion pilot program.
Specifically, borrowers with FICO scores of at least 540 can now be approved for an auto loan with a loan-to-value (LTV) ratio up to 150%.
And borrowers with FICO scores between 500-539 can be approved with an LTV up to 110%.
For context: CDG News reached out to Wells Fargo to confirm the contents of the memo, and seek clarity on what market data drove the expansion and what underwriting enhancements are in place.
In response, a spokesperson from Wells Fargo provided CDG News with the following statement:
"Wells Fargo is committed to responsible lending and providing our customers with affordable solutions for their transportation needs. As part of that work, we are continuously testing potential lending solutions in the market."
Why it matters: Expanding credit access often gives dealers tools to close deals for credit-strained buyers who remain critical to overall sales (and rely heavily on their vehicles to generate income).
Zooming out: Wells Fargo's move fits a broader industry pattern as lenders adapt to shifting market conditions.
Ford Credit recently extended promotional rates to subprime buyers (FICO below 620) to boost F-150 volume before quarter-end.
Cox Automotive reports credit access loosened year-over-year in August, with banks and auto finance companies leading (especially in franchise used and non-captive new loans).
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Between the lines: Persistent affordability challenges and mounting negative equity have created a cohort of buyers who are fundamentally credit-strained, but often vital to maintain dealer throughput.
Banks like Wells Fargo face pressure to maintain asset growth as prime volume flattens.
And expanding into subprime segments through controlled pilots is not an unprecedented move.
Meanwhile, for OEMs tying dealer allocation to high-volume vehicles, lenders that keep the pipeline flowing typically become preferred partners.
The tradeoffs: Higher LTV ratios can create challenges in future trade-in scenarios. For deep-subprime borrowers, elevated LTVs increase loss exposure if economic conditions shift. Dealers may also encounter more structured risk-sharing arrangements, including recourse provisions or first-payment default terms, as lenders balance opportunity with portfolio management.
What we’re watching: If the pilot performs as Wells Fargo expects, the expanded guidelines could roll out to more dealers nationwide. For now, participating dealers gain access to a broader customer base while the bank gathers performance data to inform future credit policy.
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