Subprime Borrowers’ Share of Auto Loans, Leases Slips

Auto loan and lease statistics from the first quarter of 2021 underscore the “K-shaped” economic recovery, where borrowers with prime-risk credit scores drive a big increase in demand, while borrowers with subprime credit are being left behind.

Auto originations to consumers with subprime credit fell to just 15% of the total in the first quarter. That’s the lowest subprime share of originations since the New York Federal Reserve started keeping track in 1999, according to the New York Fed’s latest Quarterly Report on Household Debt and Credit, published May 13.

Subprime originations were $23.3 billion in the first quarter, down 18% vs. a year ago. The New York Fed’s report is based on nationwide statistics, not just New York’s.

In total, auto originations increased 1.6% for the quarter vs. a year ago, to $152.7 billion, the New York Fed said.

The last time subprime share was almost this low was a 17% share on two occasions, during the Great Recession and the immediate aftermath, in fourth-quarter 2009 and third-quarter 2010.

The New York Fed defines subprime as credit scores below 620. Originations include both loans and leases. The New York Fed doesn’t break out originations by loans vs. leases. But according to Experian Automotive, prime-risk borrowers account for the overwhelming share of leases, and the vast majority of subprime originations are loans.

Conversely, in first-quarter 2021, the New York Fed reports loans and leases for borrowers in the highest tier of prime risk credit scores, 760 and above, increased 5.5% vs. a year ago, and accounted for the biggest share of originations, at 36.6%, up from 35.3% a year ago.