As the automotive sector adapts to rising vehicle prices, shifting consumer behavior, and persistent inflation, the ripple effects are clearly visible in commercial credit activity. Experian’s latest Commercial Pulse Report (July 22, 2025) dives deep into the evolving credit dynamics within the auto industry—and one trend is clear: credit access is contracting across nearly every segment.
Used Cars Rise, But Credit Lines Fall
With the average new vehicle price exceeding \$47,000, many consumers are opting for used cars, priced more affordably at just over \$28,000. This shift has helped drive consistent growth in the used-car market, accompanied by an uptick in business activity and a growing demand for commercial credit.
In fact, used-vehicle and aftermarket service providers have seen commercial credit inquiries jump approximately 20% above January 2021 levels. Their credit utilization rate now sits at 32%, reflecting the costs of managing larger inventories and higher parts prices. But unlike traditional signs of financial distress, this trend appears tied more to operational needs than liquidity crunches.
Despite the increased appetite for credit, credit limits are shrinking.
A Cross-Sector Credit Contraction
Across the entire automotive supply chain, from OEMs to aftermarket shops, businesses are receiving smaller commercial credit lines on new originations than in previous years. The declines are significant:
- OEMs and New-Vehicle Dealers: Average commercial card limits have dropped by \$7.6K, now sitting at \$9.7K compared to \$17.4K in 2022–2023.
- Used-Vehicle Dealers and Aftermarket Services: Limits have fallen by \$5.8K, from \$13.6K to \$7.8K.
- Vehicle and Parts Wholesalers: These businesses faced the steepest cut—\$8.9K on average, down from \$18.5K to just \$9.6K.
All subsectors experienced over a 40% reduction in average credit lines, signaling tighter lending conditions despite robust business activity in several parts of the industry.
Why Are Credit Lines Shrinking?
This broad contraction is not purely about borrower risk. In fact, many used-car and aftermarket businesses have maintained steady commercial risk scores, and delinquency rates remain relatively flat.
A few critical factors include:
- Elevated Interest Rates: High financing costs are squeezing margins, especially for OEMs and franchised new-car dealers, where delinquencies are rising. Lenders may be proactively managing exposure.
- Segment-Specific Risk Trends: OEMs and dealers are facing mounting late-stage delinquencies—91+ DPD rates have nearly doubled since 2022—and their average risk scores are down ~4 points.
- Economic Uncertainty: Despite stable employment and wage growth, inflation, Fed policy, and geopolitical risk (like tariffs) are prompting more conservative credit practices.
- Portfolio Diversification: Lenders may be redistributing credit availability to less volatile sectors or industries with higher recovery potential.
The Middle Squeeze: Wholesale Distribution
Among the three major segments—OEM/New-Car Dealers, Used-Vehicle & Aftermarket, and Wholesale Distribution—wholesalers are caught in the middle. Their delinquency and risk score trends resemble those of OEMs, but their growing credit utilization and inquiry rates mirror the aftermarket segment. This dual exposure to shrinking new car volumes and rising parts demand puts them in a uniquely vulnerable position.
What It Means for Credit Managers and Lenders
These trends underscore the importance of granular credit monitoring. Treating the auto industry as a single credit risk profile is no longer viable. Subsector segmentation—by vehicle type, service focus, or market exposure—is key to understanding which businesses are truly at risk and which remain stable but under credit strain.
For lenders, this is a time to rebalance risk models and align credit policies with real-time sector insights. For businesses, it’s a moment to double down on credit management and strategic planning.
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