Along with extensive research confirming that the U.S. consumer credit market is increasingly splitting along a K-shaped path, TransUnion’s Q1 2026 Credit Industry Insights Report (CIIR) included an update about the auto-finance market, which is still experiencing an origination volume that trails pre-pandemic performance.

TransUnion reported on Thursday that originations — which are viewed one quarter in arrears to account for reporting —  declined 0.92% in Q4 2025, with volumes still roughly 10% below pre-pandemic Q4 2019 levels.

And before you think it was just a lender pullback and tightening of underwriting, analysts found super-prime originations fell 5.4% year-over-year, while prime plus decreased 2.9%.

Furthermore, risk is growing for both consumers and finance companies, as TransUnion reported average monthly payments continued to rise alongside higher amounts financed.

Analysts indicated new-vehicle payments increased 4.3% year-over-year to $786, while used-vehicle payments rose 2.9% to $536.

And TransUnion noted the amounts financed climbed 6.6% year-over-year for new vehicles to $45,028 and 5.0% for used vehicles to $27,232.

When it comes to staying current, TransUnion pointed out that 60-day delinquency in auto finance edged up to 1.57% in Q1 2026. That’s 1 basis point lift sequentially and 6 basis points year-over-year. The newest reading is 16 basis points higher than Q1 2024.

“Year-over-year originations dipped, reflecting a combination of affordability pressures and pull-forward demand ahead of the September 2025 EV tax credit expiration, said Satyan Merchant, who is senior vice president and automotive and mortgage business leader at TransUnion

“Delinquencies continued to rise slightly, but the slowing pace of growth is encouraging, even as affordability remains a challenge amid higher vehicle prices, higher financing costs and increased total cost of ownership,” Merchant continued in a news release.

Clear evidence about the K-shaped credit market

While credit conditions have remained stable overall, and improved for a large segment of consumers, TransUnion is continuing to see the K shaped path with individuals struggling in the face of rising expenses and increasing debt.

As the divergence between super-prime and non-prime consumers becomes more pronounced, analysts explained it is unfolding differently across the credit spectrum.

At the top, TransUnion noticed that the super-prime segment continues to expand, with the population growing by 15 million consumers between Q4 2019 and Q4 2025 as more individuals migrate into the lowest-risk credit tier.

“This upward shift reflects strengthening credit profiles and improving financial health among higher credit-quality borrowers,” TransUnion said in the news release.

Meanwhile, TransUnion found that middle-risk tiers such as prime plus, prime and near-prime have all experienced notable declines since 2019. In contrast, analysts added that the share of subprime borrowers has remained relatively stable, while many of these consumers face mounting pressure on household balance sheets.

Jason Laky, executive vice president and head of financial services at TransUnion, explained many non-prime consumers — individuals in the subprime and near-prime risk tiers — are carrying higher debt loads, with rising debt-to-income ratios that point to potential financial strain.

Together, Laky said these trends underscore a bifurcating credit landscape, one in which financial resilience continues to strengthen at the top, while vulnerability is increasing among consumers already facing greater economic challenges.

“The credit market has diverged over the past several years, and that divide is becoming increasingly evident in consumer risk profiles,” Laky said in the news release. “As super-prime consumers gain ground, with more consumers moving into that highest-scoring tier, many below prime borrowers are taking on higher debt loads, increasing their reliance on credit and showing early signs of performance stress at a time when affordability pressures remain elevated.”

More details about rising debt burdens for non-prime consumers

TransUnion acknowledged affordability challenges shape outcomes across the credit spectrum, but they weigh most heavily on non-prime consumers.

Since Q4 2019, analysts determined debt loads have risen across all risk tiers, driven by increased borrowing in part fueled by higher everyday expenses.

“These growing balances and the resulting debt service obligations constrain household cash flow and reduce financial flexibility,” TransUnion said.

As a result, TransUnion discovered super-prime consumers recorded the largest percentage increase in total debt, with average balances rising 25%, while subprime consumers followed closely at 23% despite having far less financial liquidity.

“Yet, their much smaller increase in debt-to-income (DTI) indicates that super prime is far better positioned to manage these higher levels of debt,” TransUnion said.

Analysts clarified that the DTI ratio is a personal finance measure that compares an individual’s total monthly debt payments to their gross monthly income, expressed as a percentage.

“It offers a critical snapshot of financial health and debt management capacity,” TransUnion said.

Because fewer non-prime consumers are homeowners than super-prime consumers, TransUnion explained that excluding mortgage debt and focusing on non-mortgage DTI yields a more effective comparison across risk tiers.

Non-mortgage DTI increased across all credit segments, but non-prime consumers experienced the steepest rise, according to TransUnion.

The credit bureau’s research showed that between Q4 2019 and Q4 2025, non-mortgage DTI — which includes other debt types such as credit cards, auto loans, personal loans and student loans — grew by an average of 29 basis points among super-prime consumers.

By comparison, the findings revealed an increase of 176 basis points by near-prime consumers, while subprime consumers experienced rise of 143 basis points.

Given that non-prime consumers already carried significantly higher DTI levels, Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, said these increases are exacerbating existing financial pressures.

“These trends point to two very different credit environments,” Raneri said. “Super-prime consumers generally remain well positioned to manage affordability challenges, while those in non-prime risk tiers face growing stress as required payments consume an increasing share of their income.”

Preserving non-prime credit access while managing risk

TransUnion stressed that auto-finance companies and other providers of credit haven’t simply cut off access amid the environment the research showed.

For example, analysts said bankcard lending illustrates this trend clearly.

From Q3 2019 to Q3 2025, TransUnion reported the share of subprime originations increased by 220 basis points, signaling that lenders have continued to serve this segment rather than retreat from it.

The largest gains occurred among deep subprime consumers — individuals with credit scores below 549 — whose share of originations rose by 320 basis points over the same period.

“These shifts point to sustained demand and measured lender participation despite a more challenging credit environment,” analysts said.

At the same time, TransUnion pointed out lenders have taken a deliberate approach to risk management by adjusting the structure of credit extended across risk tiers. Credit lines have emerged as a key lever in this effort.

While super-prime consumers benefited from an 11.5% increase in new bankcard credit lines, reaching $12,511 by Q3 2025, analysts noted that growth among subprime segments remained more modest.

Deep subprime new card credit lines rose 5.5% to $678, while high subprime consumers saw a 7.1% increase to $1,034.

Raneri explained these differences illustrate how lenders continue to extend access to credit while carefully calibrating risk exposure.

“In an environment where non prime consumers continue to need access to credit, it is critical for lenders to use every tool and data asset available to them to manage risk responsibly,” Raneri said. “Leveraging comprehensive insights, such as those provided by TransUnion credit solutions, helps ensure the right lending option is extended to the right consumer while protecting portfolio performance.”

To learn more about the latest consumer credit trends, register for the Q1 2026 Quarterly Credit Industry Insights Report webinar via this website.