Subprime Auto Performance Weakens Despite Favorable Seasonal Backdrop

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

• Broad Underperformance: March is historically the strongest performing month, driven by tax refund season; the widespread underperformance across nearly all metrics is notable.
• Impairments at Record Highs: 30+ Impairments have set new seasonally adjusted records for 17 consecutive months. The March improvement was 5x smaller than the seasonal average, with impairments now 200 bps above March 2025 levels.
• LTV Remains the Key Differentiator: Performance divergence across LTV ranges has widened well beyond historical levels.
• GWAC Dynamics Shifting: Impairment growth over the past 18 months is concentrated entirely among above 20% GWAC loans, while below 17% GWAC loans have seen declining impairments and charge-offs since 2024.

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?