New auto loans and leases to auto buyers with less-than-ideal credit are slipping, reported the New York Federal Reserve.

Subprime credit refers to those with credit scores lower than 620 that banks consider more of a loan repayment risk. Those sellers appear to be seeking fewer loans than in previous years. 

The New York Federal Reserve’s Quarterly Report on Household Debt and Credit, released May 13, reported the lowest subprime share of loan originations, which includes loans and leases, since it began keeping track in 1999. Auto loan originations to subprime borrowers fell to just 15% of the total in the first quarter. 

Subprime originations hit $23.2 billion in this quarter, representing an 18% drop from 2020 levels. Total auto originations increased 1.6% in the first quarter to $152.7 billion.

The 15% figure is lower than the 17% share of subprime originations during the Great Recession in 2008, the fourth quarter of 2009, and the third quarter of 2010. 

Auto loan and lease statistics support a K-shaped economic recovery where borrowers with prime-risk credit scores drive demand while borrowers with subprime credit hold back purchases. 

The data from the New York Federal Reserve supports this. The report found borrowers with credit scores of 760 or above increased 5.5% over 2020 levels and represented the largest share of originations, at 36.6%, up from 35.3% in 2020.

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