Rising insurance costs add to affordability woes

Car buyers are facing a tough market as rising insurance costs add to vehicle ownership expenses and lenders are mindful of high loan-to-value ratios.

The national six-month auto insurance premium rose 7.5% year over year to $1,163 in May, with the average up 20.6% YoY to $1,263 in the first quarter. Individual borrowers’ insurance premiums are difficult for auto lenders to track, creating a challenge as insurance payments take up a larger portion of consumers’ budgets.

Amid high insurance and vehicle costs, first-time car buyers are navigating challenges in securing financing as lenders are cautious regarding high loan-to-value ratios and limited credit history.

Affordability was also a leading topic among dealers at the recent National Independent Automobile Dealer Association Convention and Expo. Independent dealers are aligning inventory with what consumers can buy.

Meanwhile, the capital markets remain active despite cost volatility. Nonprime indirect auto lender Arra Finance closed its first asset-backed securitization and PenFed Credit Union issued its first auto ABS deal of 2026 this month.

In this episode of “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Deputy Editor Johnnie Martinez, Senior Associate Editor Aidan Bush and Associate Editor C.J. Moore discuss top trends across affordability, vehicle sales, dealer activity and funding.

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