Affordability drives 2026 auto finance playbooks

Auto finance leaders are focusing their 2026 strategies on consumers’ price concerns as buyers shift toward used vehicles and lower financing costs. Auto tariffs , the elimination of federal EV tax credits and rising vehicle costs are putting consumers’ financial burdens top of mind for dealers and lenders. “The biggest concern for me right now is affordability,” Chris Kleczynski , vice president and head of auto lending product strategy at PenFed Credit Union , told AFN . Discussions around affordability penetrated every panel and conversation at the recent American Financial Services Association Conference and Expo, the J.D. Power Auto Summit and the National Automobile Dealership Association Show in Las Vegas earlier this month. Automakers, dealers and lenders need to work together to keep vehicles affordable, TD Auto Finance Chief Executive Nadir Jones said at AFSA. Collaboration, he said requires: Lenders and dealers ensuring consumers have loans they can afford; and Manufacturers offering incentives to help moderate cost increases. “The obligation falls on a few of us to maintain that affordability,” Jones said. New vehicle costs prohibitive [caption id="attachment_58359357" align="alignnone" width="2560"] From left: Huntington Bank Director of Consumer Finance Richard Porrello and #1 Cochran Automotive Chief Executive Rob Cochran.[/caption] Rising new-vehicle prices may block sales unless the industry mitigates costs, #1 Cochran Automotive Chairman and CEO Rob Cochran said during a panel at AFSA. “What can we do so the new vehicle is not just for a wealthy person? We don’t want it to evolve into that,” he said. “We want new vehicles to be able to be sold to the everyday person and, candidly, that’s becoming increasingly challenging.” — Rob Cochran, #1 Cochran Automotive The average new-vehicle price was $49,191 in January, a 1.9% year-over-year increase and a record for the month, according to Kelley Blue Book data published Feb. 10. January new-vehicle ATPs [caption id="attachment_58359358" align="alignnone" width="1024"] (Courtesy/Kelley Blue Book)[/caption] Additionally, no automaker is offering a new vehicle priced below $20,000, according to a Feb. 11 Kelley Blue Book report. Shift toward used A lack of affordable new vehicles coupled with sustained high interest rates may push some consumers to purchase certified pre-owned or used vehicles , Betty Jotanovic , president of auto relationships at Santander Consumer USA , told AFN at NADA. “It’s opened up a lot of consumers to move further down the chain, trying to balance out the heavy cost of a car combined with still-high interest rates,” she said. Despite the overall increase in new-vehicle prices, the most popular new cars may be less expensive YoY, according to dealer software provider CDK Global ’s Affordability Tracker, published Feb. 10. The tracker takes the average of the month’s 10 bestselling cars’ and four bestselling light-duty pickup trucks’ transaction prices and compares it to the average from the previous year. In January, the average bestselling car price was $35,642 in January, down 0.4% YoY, according to CDK. This dip may imply that affordability pressures come from increased costs across all aspects of vehicle purchasing — monthly payments, repair and insurance costs — rather than ATPs alone, CDK Director of Content Marketing Dave Thomas told AFN during NADA. New-vehicle prices may soften as more consumers opt for used vehicles instead, PenFed’s Kleczynski said. “It’s that balance. People are shifting out of new [and] going back into used,” he said. CPO opportunity The used-vehicle market represents a sales “opportunity to capitalize on,” Steve Franzel , managing director of vehicle finance at Huntington Bank , told AFN at AFSA. Used-vehicle sales rose across almost every metric YoY in 2025, including sales, price and profit, according to data provided at the J.D. Power Auto Summit. Used vehicle sales metrics in 2025 vs. 2024, 2019 [caption id="attachment_58359354" align="alignnone" width="1239"] (Courtesy/J.D. Power Auto Summit 2026)[/caption] “We had a wonderful market. … Customers, instead of leaving the market, they adapted. … They used trade equity to afford these vehicles, they extended terms,” Jonathan Banks , vice president of retailing product portfolio at JD Power, said during a presentation at the event. Certified pre-owned (CPO) vehicles perform better than used vehicles across most metrics as well, Banks said, including: Average monthly payment of $592 compared with $609 for used; Faster sales, at an average of 48 days-to-turn compared with 62 for used; and Customer loyalty, as those who purchase a CPO vehicle return to that dealership for their next vehicle 50% of the time, compared with 33% of the time for used. In fact, TD’s Jones told AFN that TD Auto Finance relaxed its policies on loan-to-value ratios for used vehicles and saw no negative impacts. “A lot of the stress we’re seeing is in the new-car arena,” he said. “We relaxed some policies around our used business to allow customers to afford getting vehicles that way. … We’ve seen a decline in our delinquency [rate] as a result.” Managing supply Inventory has been the main constraint on used-vehicle sales at Hiawatha, Iowa-based dealer Dave Wright Nissan Subaru . Used-car sales dipped by 20 cars monthly YoY in 2025 due to supply challenges, Owner Dave Wright told AFN . “You always want a $15,000 used car. They really became hard to acquire [because] everybody wanted those cars. … Our used-car sales suffered” from lack of availability, he said. However, the drought of used-vehicle inventory may clear quickly thanks to a deluge of off-lease vehicles expected to flood the market in 2026, according to JD Power. Around 2.4 million off-lease vehicles are expected to return to market in 2026, up 470,000 units YoY, according to data JD Power provided during J.D. Power Auto Summit. Of the total off-lease vehicles, 298,000 are expected to be EVs. [caption id="attachment_58359355" align="alignnone" width="1024"] From left: TD Head of Auto Finance Nadir Jones and Hyundai Capital America CEO Jim Drotman.[/caption] With increased supply, off-lease EVs could solve affordability pressures or allow consumers to try an EV for the first time, Hyundai Capital America Chief Executive Jim Drotman told AFN at AFSA. “Some of the vehicles that are coming back off lease right now from a used or CPO standpoint present an opportunity, not only for affordability, but also for consumers who may choose to test out a new technology or vehicle type before they purchase that next new vehicle.” — Jim Drotman, Hyundai Capital America Consumer demand could grow if more used EVs hit the market, lowering their price point, Matthew Metz , CEO of EV listing-aggregate EVQ , told AFN during NADA. “There’s going to be lots of EV supply. … That’s going to push down the price and democratize EV ownership, which will also spread it out in the population and set the stage for another round of growth,” Metz said. Rate cuts and refi Despite improved supply, to stay competitive without further rate cuts, Santander’s Jotanovic said non-captive lenders must consider: Extended terms; Older vehicle models; or Vehicles with higher mileage. “It’s been really competitive. There’s not really a whole lot that can be done,” she said. The Federal Reserve held the reserve rate to between 3.5% and 3.75% in January after three consecutive rate cuts in late 2025. Despite those cuts, “interest rates have come down not nearly as quickly as they went up,” Richard Porrello , director of consumer finance at Huntington Bank , told AFN at AFSA. The average new-vehicle APR was 6.83% in this month, down YoY from 7.74%, but up from 5.23% in February 2019, according to the latest Curinos data. Meanwhile, some lenders have seen refinance volume surge following the rate cuts last year. Pittsburgh-based PNC ’s refinance activity jumped 60% YoY in 2025, driven partially by consumers looking to “take advantage of the improved interest rate environment,” Strati Papageorge , senior vice president of product at PNC, told AFN in January. That refinance growth came with minimal impact on credit performance, he said. “There’s been no significant changes in credit quality, term, deal structure, anything to that effect [for refinance YoY],” he said. Without major results from existing rate cuts — and with one or two potential Fed cuts this year — manufacturers can test how consumers react to different APRs or lending terms, HCA’s Drotman said at AFSA. “That gives the OEMs the opportunity to really look and see what’s going to drive consumer behavior,” he said. Leasing, lease-like products Lenders are also looking at leasing , longer loan terms and other options to make vehicle purchases more affordable. For captives like HCA, leasing offers consumers lower payments and allows automakers to sell them vehicles more often than with a longer-term loan, Drotman said. “We want to focus on terms that can give our customers the ability to get back in a new product as quickly as possible,” he said. The average monthly payment for a leased vehicle has increased at a slower rate than the average financed vehicle’s monthly term, according to J.D. Power Auto Summit data. Average loan vs lease monthly payment amount [caption id="attachment_58359350" align="alignnone" width="1574"] (Courtesy/J.D. Power Auto Summit)[/caption] Credit Union Leasing of America ’s volume increased 43% YoY in 2025, with the lender also seeing an uptick in dealers interested in leasing, CULA President Ken Sopp told AFN at AFSA. “It’s a substantial payment difference, but also, you can get customers onto a more reasonable term,” he said. “Leasing is an obvious partial solution to this situation.” — Ken Sopp, Credit Union Leasing of America Lenders that are not interested in leasing are eyeing similar products. For example, PenFed Credit Union could reintroduce products like its balloon financing program to tackle affordability, Kleczynski said at NADA. In a balloon lending program, the car loan does not fully amortize over the term. Instead, the sum of monthly payments only covers a fraction of the principal balance. The remaining balance is due at the end of the term, when the borrower can trade the car, pay the balance, refinance or walk away, in some cases without paying anything more. Lengthening loan terms Meanwhile, some lenders are emphasizing longer loan terms. The share of loans with terms between 73 months and 84 months grew to 27.99% in 2025 from 26.35% in 2024, according to Experian’s 2025 year-in-review State of the Automotive Market Report shared during NADA. Share of loans by term [caption id="attachment_58359348" align="alignnone" width="1505"] (Courtesy/Experian)[/caption] TD Auto Finance and PenFed Credit Union have increasingly originated 84-month loan terms in the past few months . In the first quarter of 2026, Bank of America also plans to expand eligibility for 84-month financing to vehicles up to 4 model years old , from the current limit of 3, Tim Owens , head of consumer vehicle lending, told AFN at AFSA. The move, he said, is spurred by the affordability needs of bank customers. However relief is provided, consumers remain in a “tug of war,” delaying expensive vehicle purchases when possible, but still viewing a vehicle as a necessary purchase, Santander’s Jotanovic said. While affordability pressures may keep customers away from some upgrades or expensive models, vehicle sales are bouncing back, she said. “Eventually that pent-up demand turns into a purchase,” Jotanovic said. “Even though vehicle sales are not quite where we were in the peak … we are starting to see a recovery.” —Additional reporting by Amanda Harris Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Affordability drives 2026 auto finance playbooks

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