Subprime Auto: Mixed February, Risk Building Beneath the Surface

dv01’s latest auto performance report is now live, incorporating insights from Experian’s Q4-2025 State of the Automotive Finance Market.

What the Data Shows

• Credit Loosening Emerging: Experian data shows a reversal in credit tightening, with Near Prime and weaker segments gaining share for the first time since 2021, even as performance continues to deteriorate.

• Mixed Performance: February is typically a seasonally favorable month for performance; while impairments and charge-off showed strong improvements, they were offset by weaker New Impairments and curing behavior.

• Severities Remain a Key Risk: Loss severities have risen more than 1,500 bps from pre-COVID levels, with half of that increase occurring in just the past six months.

• LTV Remains a Key Divider: Charge-offs declined across all LTV ranges in February, but higher LTV loans continue to underperform.

What We’re Watching

• Performance has not exceeded seasonal trends in any month since October, will this change in the critical month of March?

• When will the recent credit loosening seen in the Experian data translate into securitization activity, and will it drive another leg down in performance?

• With severities likely reaching 60% in the next three months, how will investors—and more importantly, residual holders—shift origination and servicing behavior?