Podcast: Credit access improves, but some borrowers turn to credit-builder loans
Listen as AFN editors break down top stories from past week
While credit access improved in May and vehicle prices were steady, affordability remained a concern, especially for credit-challenged consumers who face multiple forms of debt.
The Dealertrack Credit Availability Index increased 2% year over year in May to 96.7 as credit unions and banks loosened standards and approval rates improved. At the same time, the average new-vehicle transaction price ticked up 1% YoY but was nearly flat month over month at $48,799.
But as student loan payments resume and that debt is again reported to credit reporting agencies, some nonprime borrowers are turning to credit-builder loans and buy now, pay later programs to improve their credit history and finance downpayments for vehicle purchases.
Meanwhile, in one of the first actions since the Consumer Financial Protection Bureau undertook a more limited approach to supervision under the new administration, the California State Senate passed a bill that would allow dealers to increase document fees to a maximum of $500. The current processing charges, in effect since 2019, are $85 for new cars and $70 for used cars.
The change would align the state’s processing fees with that of other states but has received backlash from some consumer advocacy groups that claim the uptick is another “junk fee.”
In other news, Arra Finance acquired Crescent Bank’s $815 million auto portfolio and plans to grow originations by leveraging the bank’s technology stack and dealer base.
Other auto finance companies have also seen growth in the first part of the year, including Carvana and Global Lending Services.
In this episode of “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Senior Associate Editor Truth Headlam and Associate Editor Aidan Bush discuss trends in affordability and compliance along with company updates for the week ended June 13.
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This episode is sponsored by Datascan.
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
It is Monday, June 16th and I’m Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending June 13, 2025. First, I’d like to thank our sponsor for this week’s podcast data Scan. Now I’ll turn it over to Aidan and truth to share their top takeaways from last week.
Truth go ahead. Truth Headlam 0:46 Thanks, Amanda. Credit union Leasing of America originations increased 56.3% year over year through May as consumers continue to search for affordable ways to obtain cars. Additionally, credit access improved in May as consumers demand for for cars persist.
The dealer tracked credit availability index rose 2% year over year and 1.3% month over month.
Lender is leading the charge, where banks and credit unions, which seem to have loosened their credit criteria. Subprime shares of auto loans jump 33 basis points month over month, reflecting the impact of that loosened criteria. And as consumers across the nation look to lower costs. California vehicle purchasers may face heightened document process fees starting as soon as 2026 if signed into law. Senate Bill 791, passed by the California State Senate. Will allow dealers to increase the document processing fees to up to 1% of the. The total vehicle price, or a maximum of $500. The current processing charge is $85 for new cars and $70.00 for used cars. This further increases affordability concerns, despite the improvement in credit access, Aidan has more. Aidan Bush 2:03 Yeah. Thank you so much. Truth, kind of. On that note, there’s been a few really interesting trends we’ve noticed in the nonprime space when it comes to credit access. So one of those things is credit reporting agency trust science found that more consumers are actually financing their down payments for their cars through loans they get elsewhere. And it’s, as he mentioned, it’s sort of a very different risk profile compared to people who come up with the down payment on their own terms on their own cash.
He also attributed this to potentially the rise in small scale installment loans like buy now pay later products and that was from Colin Tran, who was the vice. President of Corporate Affairs for trust science. On a similar note, there’s been a concern among lenders of these credit builder consumers. While they make up less than 1% of consumers with credit scores across all agencies, according to Fico’s Charles Blanc, credit builder loans and credit builder customers are essentially folks who are using. The loans that are strictly made to establish payment history for customers, so unlike a personal loan where. You may get a portion of it kind of upfront. The money for a credit builder loan is deposited into like a savings account or a certificate of deposit account and is only available after borrowers make their monthly payments. And that’s because this is pretty much exclusively to build a payment history and show that the consumers are able to pay their loans. What they’ve found so far, according to Cham’s blog, is that these trade lines do raise consumer credit scores by about seven points on average. But you know the profile of these credit builders can be riskier. Around 80% or more of these consumers have serious delinquency, she said. Another interesting kind of credit mix trend we’ve seen is how student loans are starting to affect auto lenders credit mixes. So just for a little bit of a, you know, kind of stepping back for some context, the United States Department of Education started reporting mid student loan payments in January and we heard from Fico’s Charles Blanc that there’s about two million consumers who both have auto Lo. And then also have missed student loan payments in the past? So these are the people who are going to start seeing Deans, to their credit as a result, now that these student. Reported again, she mentioned that there’s around 400,000 consumers who have had their credit scores drop by 100 points or more from this, so her example was this is a a drop that’s big enough to take your credit score from that prime range to the C. Of subprime and what that can mean is for a lot of these nonprime auto lenders, their credit mix may look worse now than it did at the start of the year. The good news on that, however, is that some data suggests that these consumers are still prioritizing their. Loan payments over everything else. So while they might be in a lower tier of credit, now, they’re not more likely to be delinquent per southeast. That’s about all I have, so I’ll turn it over to Amanda now. Amanda Harris 4:57 Great. Thank you, Aidan. And truth, also like last week, we had economic news, recurring applications for us. Unemployment benefits reached their highest level since 2021, while continuing claims, which measures people who are currently receiving benefits, rose to 1.96 million for the week end. May 31. President Trump also floated raising tariffs on imported vehicles, which currently sit at 25%. That immediately resulted in declines of some of the largest automakers. Stocks and we have. We’ll have to continue to look out for whether those changes do get put in place and auto finance news. Arra Finance acquire Crescent Bank’s $850 million auto portfolio and plans to go originations by leveraging the bank’s technology stack and dealer base, the. Transaction is expected to close in the third quarter when Arra will take over servicing for the portfolio and will bring over 180 Crescent employees, many of which will work in servicing. The acquisition will allow Arra Need application processes to within seconds allow for more automated decisioning. Provide E contracting capabilities. Grow originations volume and tap a base of more than 6000 dealerships. Other auto finance companies have also seen growth in the first part of the year, including Carvana and global lending services. Carvana issued a $670 million prime auto asset back securitization deal on June 10 as the company looks to grow through improving customer offerings, increasing awareness of the brand and. Growing its inventory selection. Global Lending Services during the spring tax season also launched EV financing as a lender looks to lean into its growing near prime offering and as more non prime consumers show demand for Ev’s as prices decline, GLS is also implementing new tools aimed at. Making it easier for dealers to work with the lender and speed automated loan decisions in powersports. North American RV retail registrations declined 8.5% year over year in April. As affordability and credit issues continue to plague consumers, thank you again and datascan for sponsoring this episode. Their new risk, a solution, allows financers to tap real time analytics and avoid missing red flags between audits. And as always, thank you for joining us on the road map. Be sure to follow us on X and LinkedIn and we will see you online at auto Finance News net and here next time.
