Tariffs Spur Increase in Auto Loans as Consumers Grow Cautious, VantageScore Finds

Auto loans drove an unexpected surge in consumer lending in April, outpacing other categories to hit pre-pandemic levels.

A mix of economic worry and new U.S. tariffs spurred buyers — particularly younger consumers — into action, according to the April 2025 VantageScore CreditGauge, released May 28.

“Buyers appear to have accelerated their car purchases in anticipation of higher sticker prices due to the recently implemented tariffs,” said Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore,

Auto originations increased across all demographics with the largest month-to-month gain, a 0.5% increase, realized by Gen Z. Seasonality also had an impact, with tax refunds — a frequent motivator for big-ticket transactions like cars landing — during the period.

Personal loan originations also increased, which helped overall originations rise from year to year. While originations are up, borrowing behavior is stabilizing. The average balance barely increased by $14 during March, only a 0.01% gain. The sluggish rise represented four straight months with the balances at a five-year high.

Consumers are reacting to inflation and rising interest rates by reducing discretionary spending and reserving their use of credit for essentials or long-term purchases.

Digging further, VantageScore said the loan-to-balance ratio has trended downward since January 2025, dropping to 50.81%, down by 0.64%. This suggests that customers are borrowing more responsibly and spending perhaps only when absolutely necessary or for big-ticket items, and not overborrowing.

Not all segments are developing at the same speed, according to the score data. While the super prime tier got a slight boost, both the prime and the near-prime customers (VantageScore 661 to 780) held steady, which suggests that access to credit is stable for most of the middle tier.

But the subprime tier — scores lower than 600 — had minimal increases in utilization rates, which indicates growing reliance on credit from economically stressed customers.

The credit market continues to be mixed. While some borrowers are keeping debt under control, others, especially those in lower tiers, are under heightened stress as even modest expense increases can spark delinquencies.

Meanwhile, the average VantageScore 4.0 was 702, decreasing only 0.1 points from one month to the next. Such stability is part of a broader strengthening of credit health. The number of VantageScore Superprime consumers (781 to 850) rose to 31.3% in April, from 30.3% during April 2023.

But all the news isn’t positive. While early stage delinquency fared better across all days past due (DPD) categories, the year-over-year trend isn’t quite as comforting.

Mid-and later-stage delinquencies are still higher, with 90-119 days past due performance particularly hindered by the renewed student loan delinquency reporting.

The mixed signals of growing originations, stable scores, increasing late delinquencies, and level volumes are the characteristics of a cautious yet responsive lending market. Consumers are continuing to borrow, especially when faced with a pressure from the imposition of tariffs, yet are becoming more disciplined and selective.

For both industry professionals and lenders, the April CreditGauge represents opportunity and risk in equal measures.

Responsive demand is likely to surge with policy or economic fluctuations, but the long-term health of the credit industry will depend on borrowers navigate rising obligations, especially in the auto and student loan categories.

The broader economic landscape will play an essential role in shaping the direction of future CreditGauge reports. Policy decisions at the Fed, employment patterns, and foreign trade reactions are all capable of reinforcing or undercutting current trends in credit.

The reinstatement of student loan payments on credit reports can also have long-range impacts on delinquency behavior, particularly with regard to young borrowers who are still finding their way onto repayment schedules. It would be prudent for financial institutions to segment their marketing by generational lending habit.

Gen Z’s interest in auto loans reflects their need for mobility, especially as people flock to cities and jobs move around. Gen X and baby boomers, however, will continue to emphasize control over debt and discipline.

The coming months will tell if April’s shopping habits are an immediate response to the imposition of the tariff or the onset of a longer trend of lower spending by the consumer.