ATLANTA—Auto lenders are heading into the second half of 2026 facing a sharply divided market in which rising borrower stress, record subprime delinquencies and persistent affordability pressures are colliding with unusually strong used-vehicle values that continue to prop up collateral performance, according to the new Black Book-Fitch Vehicle Depreciation Report.
The report said the used-vehicle market has stabilized following years of pandemic-era volatility, but warned the industry has not returned to historical norms. Instead, lenders are operating in what Black Book described as a “new equilibrium” defined by elevated vehicle prices, constrained used inventory and widening divergence between vehicle segments. Annual depreciation for 2- to 6-year-old vehicles was -13.9% in 2025, with Black Book forecasting a more moderate -11.9% decline in 2026.
For lenders, one of the biggest concerns remains mounting stress among subprime borrowers. Fitch reported 60-day-plus delinquencies in subprime auto ABS climbed to a record 6.9% by early 2026, while annualized net losses rose to 9.81%, reflecting what the ratings agency called continued deterioration tied to inflation, higher interest rates and elevated living costs. Fitch added that borrowers with thinner credit files and undocumented immigrant borrowers showed particularly elevated stress, contributing to heightened scrutiny of subprime underwriting and servicing practices.
Prime auto lending remains considerably healthier, but Fitch warned even higher-credit borrowers are increasingly relying on longer-term financing to manage monthly payments. The report noted the average new vehicle payment reached $760 in 2025, while 84-month loan terms became increasingly common as consumers struggled with affordability. Fitch reminded that extended loan terms raise longer-term risk for lenders because slower amortization can leave borrowers underwater longer if vehicle values weaken.
At the same time, constrained used-vehicle supply continues benefiting lenders by supporting collateral values and recoveries. Black Book said lingering shortages of late-model used vehicles tied to reduced leasing and fleet activity during the pandemic are expected to keep used prices elevated for years. Fitch noted recovery rates in prime auto ABS improved to more than 62% in 2025 as strong used-car demand and tariff-driven pull-forward buying activity temporarily boosted wholesale prices.
The report also pointed to growing segmentation across the vehicle market, with affordability-focused vehicles such as compact cars and small pickups outperforming while luxury and discretionary vehicles weaken under higher financing costs. Black Book said the market now behaves less like a single system and more like a collection of separate submarkets driven by price point, utility and buyer affordability.
Electric vehicles remain one of the largest uncertainty factors for lenders and leasing companies. Black Book projected used BEV prices will decline another $1,500 to $2,500 in 2026 as more off-lease EV inventory hits the market and federal tax credits disappear. The report said BEV retention values continue lagging traditional internal combustion vehicles due to rapid technology shifts, pricing volatility and uncertainty around long-term battery performance.
Fitch said broader economic conditions could further pressure auto credit performance in 2026. The agency forecasts U.S. GDP growth slowing to 2.2%, unemployment rising to 4.6% and continued strain from higher fuel and ownership costs. It also warned that escalating geopolitical tensions involving Iran and sustained oil prices near $100 per barrel could significantly worsen inflation and subprime loan performance.
Despite those risks, Black Book said the overall market outlook remains one of “measured stability,” with controlled depreciation and continued support from structurally tight used-vehicle supply. But the report cautioned lenders, dealers and fleet operators that success increasingly depends on segment-specific strategies and careful management of affordability-driven demand shifts.