Tom O’Neill and Dave Sojka, Senior Advisors at Equifax
With 2026 well underway, there are some important factors for credit union executives to consider as they consider their auto lending strategy for the year. First is an understanding of how U.S. consumers—their members—are faring in today’s economy.
The primary driver impacting all credit union members related to auto lending is affordability, driven by increased costs of cars and parts, reduced inventories, and the rising cost of auto insurance.
All of this has led to the “$1,000 payment threshold” challenge we see today. Edmunds Q4 2025 data reflect that nearly 20% of new car buyers now have a $1,000 monthly payment with some loan terms as long as 90 months. This is attributable to the average cost of a new car exceeding $50,000 and interest rates remaining persistently high (around 8% on average for new cars and around 13% on average for used cars based on Cox Automotive January 2026 data).
According to the latest monthly Market Pulse Auto Insights Report by Equifax, for U.S. consumers earning $100,000 or more per year, the average auto loan amount is around $30,000. But for consumers earning less than $50,000 annually, the average auto loan amount is around $27,000, representing more than half of their annual salary.
This puts a large percentage of the population under increased financial pressure, as reflected in the latest auto loan delinquency rates. According to the Equifax U.S. National Consumer Credit Trends Report – Originations, 7.1% of subprime auto loans (defined as having a credit score less than 620) are now 60+ days delinquent as of December 2025. Because auto loans tend to be positioned at or near the top of consumers’ payment hierarchy, auto loan performance often serves as an early indicator for the general economy.
The industry is seeing some shifts in consumer behavior in response to these affordability challenges. First, consumers are actively choosing to purchase used cars over new and many are actively looking to refinance their existing auto loans to reduce their monthly payments. There has also been a notable increase in the number of auto leases originated (up 9.8% year-over-year as of December 2025, according to the latest Equifax Market Pulse Index) as consumers explore options to keep their monthly payments lower.
Credit Union Impact
So, what does this all mean for credit unions specifically?
Credit unions are well-positioned to thrive in today’s auto lending market. Where banks tend to be driven by risk-based pricing that pushes some consumers out of the market, credit unions work closely with their members to tailor loan options that best fit their budgets and financial goals.
This is reflected in the data as credit union auto loans tend to perform better over time compared to banks and captive auto lenders. Credit unions also dominate the auto loan refinance market, which provides a viable pathway to grow membership.
Perhaps most interesting is the opportunity presented by Gen Z consumers. Gen Z is unique in that they display some stronger financial characteristics (like increased tendency toward savings at a younger age) than their predecessors. They are also the generation that is being hit hardest by inflation and continued economic uncertainty, so they tend to be drawn to organizations they view as providing better value for their time and money.
Looking Ahead
The immediate future for auto lending is promising, with interest rates expected to drop even further this year. Additionally, tax refund season is usually a driver for auto sales, and this year, many Americans are expected to receive higher-than-average tax refunds as a result of the One Big Beautiful Bill Act. Furthermore, depending on the individual’s circumstances, some consumers may be able to deduct a portion of their car loan interest when filing their taxes, providing another incentive for potential buyers to explore new financing or refinancing options.
For credit unions, auto lending provides a strategic pathway to engage with more consumers and grow membership. However, it will ultimately be up to credit unions to maximize the opportunity to forge a meaningful, lasting member relationship that continues after the auto loan is paid off.