Rising gas prices, high rates add to affordability woes

Despite a rise in subprime financing share in the fourth quarter of 2025, affordability remains a key focus for auto lenders and dealers as lower-income consumers continue to be disproportionately affected by higher everyday costs.

Subprime share of total vehicle financing in Q4 2025 stood at 15.3%, up from 14.5% a year earlier, according to Experian data. Prime borrowers continued to lead market share for new-vehicle financing as subprime customers remain challenged by high vehicle costs, but Federal Reserve interest rate cuts and tax refunds will potentially bring some relief in 2026.

Affordability challenges contributed to a slowdown in retail vehicle sales across much of the country in the first part of the year, evidenced by trends in the March 3 edition of the Fed’s Beige Book. Dealers across many Fed regions reported flat to decreased new- and used-car sales as higher interest rates and rising gas prices further tightened consumers’ wallets.

The war in the Middle East has contributed to higher oil and gas prices since the U.S. and Israeli strikes on Iran on Feb. 28, which could raise funding costs and prompt a shift in investors’ strategies.

Meanwhile, powersports lender Octane has shored up additional funding as it aims to grow originations and its captive-as-a-service offering. New York-based Octane’s originations rose 29% year over year to $2.1 billion in 2025.

In this episode of “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Deputy Editor Johnnie Martinez II and associate editor Aidan Bush discuss top trends across macroeconomic dynamics, affordability, funding and powersports lending for the week ended March 6.

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