The State of Subprime Auto Finance: Challenges & Opportunities in 2024

The auto finance market is at a critical juncture, with affordability concerns, negative equity, and rising delinquencies reshaping consumer and lender dynamics. For business owners in the auto finance and dealership sectors, understanding these shifts is more crucial than ever—especially if you’re considering a sale in 2024.

🔑 Key Trends to Watch:

• Subprime Financing Tightens: Subprime loans now represent just 15.9% of the market, as lenders raise standards.
• Affordability Crunch: The average new vehicle loan payment has soared to $736/month, pushing more consumers toward used vehicles, which make up 61.74% of all financing.
• Negative Equity Hits Record Highs: Over 50% of used car loans now exceed 120% loan-to-value (LTV), with negative equity on trade-ins averaging $6,458.
• Delinquencies Surge: Serious delinquencies among subprime borrowers have climbed to 6.23%, a level not seen since the Great Recession.
• Leasing Makes a Comeback: Leasing accounts for 25% of new vehicle registrations, buoyed by automaker incentives and federal EV tax credits.

What Does This Mean for Business Owners?
Affordability pressures and rising risks create challenges—but also opportunities for innovation and strategic positioning. Lenders, dealerships, and service providers must adapt to maintain stability and consumer confidence.

💡 Considering a Sale in 2025?
Now might be the ideal time to explore your options. With over two decades of expertise, Colonnade Advisors specializes in guiding business owners through successful transactions. The shifting market could position your company for an attractive valuation if handled strategically.