Macroeconomic uncertainty has resulted in rising auto rates for prime and subprime, and the gap between the two credit tiers is widening, according to the latest data from the SEC’s EDGAR.
And while rising rates can further strain affordability for consumers, dealers may still be able to capitalize in Q4 as rate ceilings are approached with proper strategy.
Through August, the weighted average prime auto rate sat at about 6.7%, while the weighted average subprime rate was almost 18%, according to EDGAR auto loan data.
Driving the trend: Weighted average auto loan rates for subprime have been relatively stable at higher levels throughout the first half of the year, while prime has ticked down slightly throughout the first half of the year, Bobby Jorgensen, vice president of structured finance at Moody’s, told CDG News.
For 2026, the weighted average APR for auto loans, which is based on auto loans that are securitized and packaged to investors, may be in line with last year depending on what loans are securitized.
Notable caveats: Auto rates are expected to keep rising, but there’s also been an “interesting twist,” Jonathan Gregory, senior director of economic and industry insights at Cox Auto, told CDG News; however, some credit tiers don’t have as much room for an increase as others.
“We've seen that increase be more in the prime,” he said. “Deep subprime hasn't been as affected by the increase in bond yields, just because they're already up [around] 20% already – depending on your state too, they can only go so high.”
He added that, in some cases, there isn’t much room legally for rates to continue to rise.
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Additional factors: Seasonality in the fourth quarter is also something to keep in mind, with October typically being a slower month ahead of a spike in December.
This year, however, there are fewer new model years as a share of new inventory.
Even as new inventory hits the show floor, it will be at higher prices that will likely incentivize price drops for older models.
Bottom line: As the overall rate environment increases and the spread between subprime and prime auto rates continues to widen, dealers may be able to capitalize on the holiday-fueled traffic that comes in by:
Being persistent with well-qualified buyers when they can;
Being selective with inventory. “We see too, with elevated gas prices, that there is a bit of a bias for some more fuel-efficient vehicles,” Cox Auto’s Gregory said.
Staying aware of the type of vehicles consumers in their designated market area require; and
Capitalizing on the used-EV boom if possible.
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