Monthly Auto Loan Market Report: December 2025

Fewer people are buying cars, and those who do are paying more each month.People are hitting the brakes on new cars because everything feels too expensive. The slowdown kept going right through summer and fall. Banks & credit unions are writing 10% more loans than last year captive lenders (Toyota Financial, GM Financial, etc.) are doing 15% fewer loans. The big manufacturers’ finance arms are getting nervous about people not paying, so they’re saying “no” more often. Regular banks and credit unions are picking up some of the slack, but mostly to safer customers.

Federal Reserve rate cuts in 2025 have not yet led to declines in auto loan rates, which continue to move higher in recent months despite the benchmark rate reductions. Auto loan rates remain elevated due to cooling but persistent inflation and banks' borrowing costs not adjusting immediately. Prime borrowers (credit score 661-780) access rates of 6.70% new and 9.06% used, while subprime borrowers face rates of 13.22% new and 18.99% used, contributing to higher delinquency rates among subprime groups.

After 90 days of delinquency, auto loans are likely to default. Serious delinquency levels approaching the peak, is the clearest distress signal in the consumer economy right now. Out of every 100 subprime car loans, almost 7 are now at least 60 days behind — the worst level in over 30 years. Young and lower-income borrowers are being forced to choose between car payments, rent, and groceries — and many are losing the car. Each repossession often triggers job loss (no car = no commute), reduced spending, and a credit scar that lasts years. One in every 20 auto loans is now at serious risk of default. More than 1 in 4 trade-ins are underwater — meaning the owner still owes money on the old car loan after trading it in.On average, they owe $6,905 more than the car is worth. That extra debt gets added to the new loan, making the next car payment higher and harder to afford.

The affluent keep trading up with low rates and strong resale values. Everyone else is either priced out or sliding into distress. The result is a bifurcated market — and economy — where the top keeps spending and the bottom loses mobility, jobs, and purchasing power. The auto loan market reflects a K-shaped recovery, with affluent (prime/super-prime) borrowers benefiting from low rates (4.88–6.51%), strong resale values, and access to $50K+ vehicles like trucks and EVs, sustaining spending and upgrades. In contrast, subprime/deep-subprime borrowers are priced out or in distress, with tightening credit (origination share down to 15%), higher rates ( 13.34-15.85%), and elevated delinquencies (6.65% 60+ days), leading to reduced mobility, job risks, and lower purchasing power. This bifurcation widens economic inequality.

Leasing has become the smart workaround for expensive EVs. Because the $7,500 federal tax credit can no longer be used at the dealership for most buyers, over 56% of new EVs are now leased instead of bought. It keeps defaults low and supports green-vehicle growth (global EV sales +23% in 2025). Meanwhile, fintechs and credit unions are slowly filling some of the gap left by retreating “captive” lenders (like Toyota Financial or GM Financial). Fintech companies Upstart alone did 357% more car loans this year than last year. Many drivers are refinancing their existing car loans to lower their payments. Credit unions handled about 70% more of these refinancings this year compared to last year, resulting in borrowers saving. These are the real pockets of strength in an otherwise stressed auto-loan market.

A “flight to quality” is underway. Banks are using AI and alternative data to grow safely; captives are pulling back from risk; specialty subprime lenders are left holding the bag — and the losses. Synthetic identity fraud—fake personas crafted for scams—is surging in auto lending, with flagged loans up to five times more likely to default at credit unions.