September Update: Subprime Auto Charge-Offs Post Their Worst September on Record

dv01's latest Subprime Auto Performance Report shows further weakness in September, with 30+ Impairments rising 54 bps MoM, the second-worst September on record. However, First-Time New Impairments fell 3 bps, suggesting much of the deterioration came from borrowers repeatedly falling into delinquency rather than a surge in new defaults.

What the Data Shows

• Charge-offs post their worst September: CDR rose 0.3 in September against a typical seasonal decline of 0.2, bringing charge-offs within 60 bps of their 2019 highs.
• Higher LTV loans are driving the deterioration: Charge-offs among 115+ LTV loans rose nearly 3 CDR YoY and now exceed their 2019 peaks, while loans below 105 LTV have held near 2025 levels.
• Loss severities climb further: Loss severity reached 56.2%, more than 1,100 bps above pre-COVID levels, though recent figures may be revised lower as recoveries are reported.
• Improvements in newer loans reflect issuer mix: Impairments among loans aged 9–14 months have fallen nearly 400 bps from their seasonally adjusted 2024 peaks, largely due to a greater concentration of near-prime loans.

What We're Watching

• After three consecutive months of seasonal underperformance, when will charge-offs surpass their 2019 peaks?
• Is there evidence of stronger Subprime Auto underwriting beyond the shift toward near-prime originations?
• Will loss severities reach 60%, and how might they change as more near-prime loans enter charge-off?