Auto Credit Is Splitting in Two: Banks Recover While Subprime Weakness Persists

The latest dv01 Auto Performance report reveals a growing divergence across the auto finance market. While bank balance sheet performance continues to recover, stress remains elevated across securitized subprime auto pools.

What the Data Shows

• Broad auto loan performance is improving materially: FFIEC data shows both delinquencies and charge-offs declining from Q1 2025 highs, standing in contrast to broader auto ABS trends.
• Subprime auto ABS continues to underperform seasonal trends: April marked the second consecutive month where impairments and charge-offs missed seasonal expectations.
• Regional disparities remain pronounced: The Northeast/NY Tri-State and Midwest regions remain the strongest performers, while TX/OK/LA and FL/GA/SC continue to lag.
• Prepayments surged unexpectedly: April prepayment rates rose to their highest levels since 2022, with notable strength in lower-LTV collateral.

What We’re Watching

• With performance soon to turn seasonally weaker, how high will impairments reach before charge-offs catch up to pre-COVID levels?
• When will originators adjust pricing across LTV ranges to compensate for recent performance differences?
• Will March’s decline in severity allow the sector to avoid reaching 60% this year, or was it a one-off improvement ahead of further malaise?