2026 Mid-Year Auto Finance Outlook

The first six months of 2026 have seen a variety of economic variables shifting consumer spending and lending. High tax returns throughout Q1 and the beginning of Q2 offset some of the impact of overall high inflation driven by the geopolitical climate. Throughout the first half of the year increased fuel prices cost consumers an estimated $574 million per day, with fuel prices currently trending down from this year’s high. Overall inflation rates are beginning to stabilize entering the third quarter but are still elevated from where we typically would expect to see them at this time. Consumer spending remains strong, despite high inflation rates, and credit availability is on the rise.

Throughout the past few years, we have seen recovery strategy shift from a more generalized approach to optimized strategies for different segments. Across the industry, incredibly specific strategies are continuously being reevaluated to drive the strongest results based on variables like lender priorities, location, types of paper, and assignment tier. Lenders are placing greater priority on working with consumers prior to assigning a unit for recovery, utilizing options like loan extensions and modifications, and offering longer term loans. There is a correlating decrease in vehicle conditions at the time of recovery, impacting proceeds at sale. The industry’s ecosystem has been impacted by the decrease in agents over the past few years. The greatest driver of performance is ensuring that cases are competitive for agents’ attention. Clearly communicating priorities and case information and ensuring that there is appropriate compensation to meet increasing operating costs at each stage impacts recovery performance and drives the overall health of the recovery ecosystem.

Sales were high throughout Q1, driven by higher than usual tax returns, declining later in the year than is typical and remaining several points above where we typically see at this time. The strongest performing vehicles are some of the least expensive cars, with dealerships turning to wholesale to provide more options for consumers. Nine- and ten-year-old vehicles are performing exceptionally well, being more affordable for consumers to initially purchase. As cars become more technologically advanced, these vehicles are also some of the most accessible for consumers who prefer to perform their own maintenance and repairs. Used electric vehicles are a standout in pricing, with high-initial depreciation being offset by a growth in off-lease maturities entering the market and shift in consumer priorities in response to fuel costs.

Despite economic challenges and low consumer sentiment throughout the first half of the year, consumer spending remains strong. Higher than typical tax returns this year drove consumer spending toward the auto finance industry, as consumers looked to purchase vehicles, with electric vehicles and older used vehicles performing well at wholesale. The auto finance industry continues to evolve and grow, while facing impacts from geopolitical conditions. Jennifer advises a focus on stagility, the ability to be agile and make changes while remaining consistent where possible, as organizations continue refining their strategics to meet shifting economic conditions, industry demands, and priorities from stakeholders.