Opinion: Why Helping Borrowers Keep Their Cars Is Good Business

The October 2025 subprime auto lending market numbers should make everyone in the industry uncomfortable. 

Borrowers with credit scores below 670 are hitting 60-day delinquency at 6.43%. That’s the highest level since Fitch Ratings began tracking this data in 1994, and double what we saw just four years ago. 

Meanwhile, repossessions in 2024 were 16% higher than in 2023 and 43% higher than in 2022.

Per an October 20, 2025 PYMNTS report, major lenders like Ally Financial and CarMax are cautioning investors about loan performance, signaling this crisis extends beyond small specialty lenders. 

Despite what may seem a healthy economy on the surface to some observers, auto market weakness is one of the clearest signs that lower and middle-income families are struggling. 

Getting involved the right way isn’t just about managing portfolio risk, but preventing people from losing their primary means of getting to work, school, and accessing essential services.

What’s Driving the Problem

Loan delinquencies serve as a reliable indicator of financial hardship because many Americans need a car to get around. They know if they don’t have the vehicle, life is about to get a lot worse. 

That’s why when someone defaults on their auto loan, they’ve usually already fallen behind on everything else first. Credit cards, personal loans, utilities, medical bills, and even housing can take second place to car payments. 

When consumers lose their only form of transportation, they feel trapped, stressed, and often don’t understand how to break free.

So what can subprime lenders do about it? They have more power to help than they may realize.

Set Borrowers Up for Success 

Long-term car loans create risks for buyers in the form of slow equity building and the potential for owing more on the car than it’s worth. 

Drivers are increasingly trading in vehicles that are worth less than they owe. A great first step for lenders is not to over-lend. Reasonable loan-to-value (LTV) ratios are crucial. For example, a 90% LTV maximum may be in order. 

Push for bigger down payments or shorter terms, too. Yes, it may mean smaller loan amounts, but it also means borrowers won’t be trapped with enormous debts.

Being realistic about affordability is also vital. As CNBC reported on Oct. 13, average auto loan rates are about 9%, but rates reach 18% to 20% for subprime or deep-subprime consumers.

When you combine that with monthly payments exceeding $500, or even topping $1,000 for new cars, borrowers may be set up to fail rather than succeed.

Power Up Complementary Credit Products

Offering complementary credit products can actually reduce your auto loan default risk while genuinely helping customers. 

When a borrower faces an unexpected $800 car repair or medical bill, they typically have to choose between fixing the problem and making their car payment. A small personal loan or modest credit line gives them a third option. Having that option may mean they can handle the emergency and stay current on everything.

A $500 secured credit card isn’t just about building credit. It’s training wheels for financial management. Why not start someone with a small loan product they can handle, then let them prove themselves? When they do, they can graduate to something with better terms. 

According to Fitch, subprime auto borrowers are people with credit scores of 640 or lower, but there’s tremendous variation within that group. Some just need a chance to demonstrate their ability to pay.

As Always, Early Intervention Is Best 

As lenders, you want to make sure that you detect problems with your car loan customers early.

Reach out at 15 to 30 days past due with solutions. 

A recent CNN report noted that strategic payment deferrals during rough patches can save loans and preserve customer relationships.

Financial stress on subprime car borrowers has stabilized in 2025 after large increases in late payments and repossessions over the past two years, suggesting that early intervention works when lenders actually practice it.

Profit and Purpose 

It’s always important to recognize that subprime borrowers are often dealing with circumstances that would challenge anyone.

When you help a person improve their credit score, you’ve changed their financial trajectory. 

A $1,000 repair loan can prevent them from losing their car and their job. Do that and you’ve made a real difference in their lives and established loyalty. 

By providing transparent terms, fair pricing, and pathways to better products, you’re building essential customer connections. And hopefully, you’ve helped them get a car they can afford or keep the car they have.