As vehicle prices and interest rates continue to evolve, both consumers and lenders are recalibrating their approaches to affordability and long-term sustainability. This shift has resulted in the subprime segment growing to its largest share of total finance market for subprime in the fourth quarter since 2021.
According to Experian’s State of the Automotive Finance Market Report: Q4 2025, subprime borrowers accounted for 15.31% of total vehicle financing, an increase from 14.54% in Q4 2024.
To understand why the subprime space is evolving, we took a deeper dive into the affordability picture and how changes in pricing and interest rates are influencing both consumer decisions and lender strategies.
In Q4 2025, the average loan amount for a new vehicle increased $1,882 from the prior year to $43,582, and the average interest rate for a new vehicle went from 6.34% last year to 6.37% this quarter. As a result, the average monthly payment increased from $746 to $767 in the same time frame.
On the used side, the average loan amount increased $872 year-over-year, reaching $27,528 in Q4 2025. However, despite the average interest rate declining from 11.63% to 11.26% during the same time, the average monthly payment grew $9 from last year to $537 this quarter.
These changes are prompting thoughtful adjustments across the automotive ecosystem. Consumers are comparing financing options more carefully and adjusting loan terms when necessary to prioritize the cost of ownership.
Lenders are also focusing more on payment flexibility and how long-term borrowers are performing as they leverage it for central pillars of strategies to stay ahead of the ever-evolving market.
To learn more about automotive finance trends, view the full State of the Automotive Finance Market Report: Q4 2025 presentation on demand.
