How to Get Your Share as Auto Loans Throttle Down in 2026

By Steve Cocheo, Senior Executive Editor at The Financial Brand

Published on February 27th, 2026 in Product Strategies

Simple Subscribe

Subscribe Now!

TransUnion is forecasting a 1.5% downtick in auto loan originations for 2026.

This comes in the wake of continuing affordability issues as car prices rise. In addition, growth was boosted in 2025 as consumers tried to avoid the imposition of tariffs and accelerated their purchases of electric vehicles before the end of the federal EV tax credit.

At the same time, a separate study by TransUnion indicates that demand for vehicles continues to be strong, with the accompanying appetite for financing. The firm’s research found that four in 10 U.S. adults plan to buy a car, most of them in 2026.

However, of those consumers indicating that they are not planning to buy a car, 53% cite cost concerns and 44% cite economic uncertainty.

Key point: The two trends suggest that auto lenders need to explore ways to serve consumers’ desires for affordable credit as prices continue to rise. TransUnion has also found changes in consumers’ car buying behavior that will require lenders to change how they reach potential borrowers and even who they reach out to. Some opportunities for growth may be found in financing electric vehicles as the auto industry resets in the wake of the massive turnaround in federal EV policy.

Need to Know:

A key indicator: New-vehicle prices hit a January record last month, rising to an average of $49,191, an increase of 1.9% from the year earlier, according to Kelly Blue Book.
The average monthly payment for new vehicles rose to $782 in the fourth quarter of 2025, nearly a 3.5% increase over 2024, according to a preliminary report from S&P Global Mobility Auto Credit Insight, which partners with and draws on TransUnion data.
The average monthly payment for used vehicles rose to $538 in the fourth quarter, up 3.1% year over year, per S&P Global Mobility.
The average amount financed in the fourth quarter for new cars was $44,495, up 4.9% year over year, also per S&P Global. For used cars, the average hit $27,278, up 4.3%.
Lower-end new cars are becoming more scarce. Kelly Blue Book notes that the subcompact Mitsubishi Mirage, with a manufacturer’s suggested retail price of less than $20,000, has been discontinued, and the similarly priced Nissan Versa has also ceased production.
Increases in prices and payments are shifting a bigger share of new loan originations to super prime borrowers, according to Satyan Merchant, SVP and automotive and mortgage business leader at TransUnion. It is also driving a greater portion of higher-end cars, pushing up average prices.

Why Your Institution Should Consider Leases

TransUnion’s research found that among Americans planning a vehicle transaction in the near future, 87% intend to buy, but 13% intend to lease. Merchant says the firm’s research indicates that for new vehicles, the trend has proven even stronger, with one in four new vehicles being leased rather than purchased.

Demographic opportunities: Merchant notes that leasing is becoming more popular among younger generations. Among those consumers planning a vehicle transaction, 17% of Gen Z and Millennials have a greater interest in leasing, while only 7% of Baby Boomers do.

“Leasing tends to create opportunities for a lower monthly payment when you compare it to financing the purchase of the same vehicle,” says Merchant. He says this is especially so with auto loan rates generally being higher than they were a few years ago.

Merchant adds that among people going for EVs, the share of those opting for leasing over purchasing was even higher — about half going for a lease — in 2025. One wrinkle: In 2025, anyone could receive the lease tax credit for EVs, while there was an income ceiling on the tax credit applicable for purchases. With the eclipse of the tax breaks, he thinks leasing’s share of EVs will settle down somewhat.

“But EV manufacturers do offer good deals when leasing an EV,” says Merchant. “EVs tend to be leased more and we believe it’s the younger generation’s interest in EV benefits such as lower fuel costs, lower emissions, and more innovative technology.”

An idea to explore: A New Jersey institution, Atlantic Federal Credit Union, offers the “Lease-Like Auto Loan.” The arrangement is a loan and the consumer owns the car, but the loan is structured to imitate the economics of a lease. Says the credit union’s website: “You own the vehicle, so the title is in your name. At the end of the Lease-Like Loan term, you have the flexibility to refinance (subject to approval), trade-in, or pay off the residual value of the vehicle.”

-- Article continued below --

Why Your Institution Should Keep Your Eye on EVs

Merchant says interest in EVs and hybrid vehicles continues to grow, in spite of the loss of tax credits. TransUnion’s research found that half of prospective buyers intend to purchase gas-powered vehicles, 33% want hybrids, and 16% want EVs.

Much of the interest in nontraditional vehicles come from affordability concerns, says Merchant. In many parts of the country EVs are cheaper to operate. On the other hand, they can be more expensive to buy up front, leading Gen Z buyers to continue to favor gas-powered cars, for now.

A change in price points may be coming. With the change in federal policy, Merchant says, some manufacturers have dropped EV prices materially. In addition, pricing on used EVs has fallen at a higher rate than used gas cars.

Merchant — who drives an EV himself — says these factors are creating a stream of more affordable vehicles that represent financing opportunities for lenders.

“Some of the most affordable vehicles right now are used EVs,” he says.

Lenders face a data drought. Between EVs’ newness to the business, and the change in tax policy, one thing the industry lacks is reliable data on residual values of used EVs, according to Merchant. The volatility of the EV part of the business will continue this state of affairs for a while, he says.

Buyers Will Go Further for a Deal, and So Should Lenders

Local auto lenders looking to build or maintain volume need to adjust how they think about the business, according to Merchant.

One factor turned up by TransUnion’s consumer research is that in their quest for the car they want at the right price, consumers are willing to travel further than ever.

• 30% of people surveyed said they would drive up to 100 miles to purchase what they want.

• 10% said they will drive beyond 100 miles for the right deal.

Merchant says this means that local dealers can’t count on grabbing up all the local demand for a particular make or model anymore, and that local lenders, likewise, have to cast a wider net to capture financing business.

It’s all about share. “You might be able to grow your portfolio even better than just relying on your neighborhood auto dealers,” says Merchant. “I think we’re transitioning out of that traditional world.”

-- Article continued below --

Marketing Needs to Be Where Buyers are Searching

A related factor is that more and more car shoppers do more of their looking around online now, rather than cruising dealer lots on the weekend. This means hungry lenders have to make themselves visible earlier in the process.

Merchant’s read is that shoppers will increasing use internet tools — and, before long, AI tools — to find what they want at the right price. He says lenders must find ways to put the right offers on the right channels, and personalized as much as possible.

Given the affordability challenge, Merchant says lenders need to target prospects better through credit-based tools.

“Somebody could market a high-end luxury vehicle to me,” he says, “but if all I can really afford, based on my credit is a $500 monthly payment, that’s a waste of time for the lender and the dealer.”