Auto lenders are homing in on key areas of underwriting to manage risk and grow in 2026 as the subprime market continues to face challenges with credit performance and affordability.

Improved loan decisioning, declining interest rates, the use of data and analytics, and responsible growth are top of mind for auto lenders into next year, leaders said at the recent Auto Finance Summit 2025.

The Federal Reserve cut its benchmark interest rate by another 25 basis points (bps) on Oct. 29, prompting lenders to prepare for an uptick in refinance opportunities. However, affordability remains a leading concern, especially for subprime consumers.

In fact, Irvine, Calif.-based subprime auto lender Bayside Credit stopped originating auto loans against the backdrop of challenging macroeconomic conditions.

Subprime credit performance is also a concern in the auto securitization market, with  and lenders that target consumers who may not be legal U.S. citizens experiencing higher-than-expected losses.

In other news, subprime lender Credit Acceptance Corp.’s originations fell 16.5% year over year in the third quarter amid competition and worsening loan performance.

Carvana, on the other hand, posted a 58.8% YoY jump in originations in Q3 and increased its forward-flow agreement with Ally Financial.

In this episode of “Weekly Wrap,” Auto Finance News Associate Editor Aidan Bush discusses trends across underwriting, subprime lending, capital markets and third-quarter earnings for the week ended Oct. 31.