Banks Are Winning Auto Lending, But Signs of Trouble Are Building Fast

More banks are making the move into auto lending, including subprime lending, and they are also feeling the stress of a rise in auto loan delinquencies. Here is a roundup of the latest data on auto lending from Equifax.

Banks have increased their auto portfolios with almost 10% year-over-year growth. Banks also are the drivers behind the growth in higher-risk lending. As proof, subprime now represents almost 22% of banks’ auto portfolios.

Auto loan performance as a whole shows signs of stress with the rise of delinquencies, 60 or more days past due on a payment, rising from 1.6% to 2%. Banks, in particular, saw a 14.4% increase in auto loan delinquencies which rose to 1.7% as of January 2026.

Banks Gain and Captives Lose 

Banks with their growth in auto lending now make up more than one-third of outstanding auto debt. Captive auto lenders maintain almost 30% of total auto debt but reduced their auto portfolio by 13% in the past year. So captives are stepping back and banks are moving forward with their auto lending. 

Smaller segments in auto lending also showed signs of growth. Lending characterized as “monoline” grew by 11% in the past year and “dealer finance” saw upticks in auto debt with 25% growth, according to Equifax.

Deep subprime lending grew by 9.4% year over year and banks were the driving force behind this growth. With their move into subprime auto lending, banks are outpacing captive lenders and credit unions with their share of the subprime auto lending market.

A Look at Auto Loan Originations

Total auto originations reached 23.4 million units through November 2025. Total origination balances increased 4.9% to just less than $710 billion.

As for banks, auto originations grew 14.2% to 7.5 million units. Auto originations at credit unions increased 8.6% to 5.9 million units. Captive lenders went in the opposite direction, with auto originations decreasing by 17.7% to 6.8 million units.

What Auto Loan Customers Want

Choosing auto loan lenders may depend on the age of the customer. For instance, Gen Z car shoppers prefer credit unions and are more likely to use monoline lenders than other generations.

Baby boomers show a strong preference for captive financing. And millennials and Gen X car shoppers take a more balanced approach when choosing among lender types. 

Interest Rates Facing Subprime Consumers

Subprime consumers pay higher rates on their auto loans. But how much higher depends on the lender. Borrowers with deep subprime credit, with credit scores of 300 to 500, are likely to pay an average of 16.01% on their new car loans, according to a U.S. News analysis of Experian data. 

In contrast, superprime credit borrowers with credit scores above 781 are likely to land auto financing at a rate of just 4.66%. These two credit extremes illustrate how important a consumer’s credit score is when shopping for an auto loan.

A Potential Change in Oversight

The Consumer Financial Protection Bureau wants to cut back on the oversight of auto lenders, particularly those serving subprime borrowers. The proposed rule would limit supervision to auto finance companies that originate more than 1 million loans a year, up from 10,000 loans a year, according to American Banker. 

This change would slash oversight from 63 auto finance companies to just five companies, and it could eliminate all oversight of subprime lenders, American Banker reports.

The Bottom Line

Banks increased their auto portfolios by almost 10% in year-over-year growth. They also increased their share of higher risk lending with subprime now accounting for 22% of banks’ auto portfolios.

Auto originations at banks grew 14.2% to 7.5 million units, and banks now make up more than one-third of outstanding auto debt. But all the news isn’t good. Banks saw a 14.4% increase in auto loan delinquencies.