Iran war gas price hikes could boost refi, especially in subprime

Gas price hikes and potential inflationary pressures due to the Iran war may shock subprime consumers first, prompting them to seek relief by refinancing their auto loans. The disruption to the oil supply brought on by the closure of the Strait of Hormuz brings “several orders of impact” to consumers, Stephen Geis , partner at investment bank LEHNS Capital , told Auto Finance News . Those impacts include: Higher gas prices can reduce consumers’ income; Higher diesel costs could spur delivery and transportation price hikes, making consumer goods more expensive; and Inflationary pressures from higher gas prices and consumer goods could keep the Federal Reserve from reducing interest rates. “Just a single [gas price] spike that goes back quickly won’t have a long-term impact,” he said. “If this stays elevated for 45, 60, 90 days, this will be a pain that individuals and consumers throughout the U.S. feel.” Brent Crude Oil Last Day Financial Futures — an international benchmark for oil prices — rose to $100.04 a barrel at 2:54 p.m. ET, up 4.2% from market open on March 24, and up 38% from Feb. 27, the day before the war started. Subprime hit first Subprime consumers feel price increases first as they often rely on their vehicles to get to work, Geis said. They also have less money saved to weather any price hikes, which could force them to prioritize rent or gas over car payments, Geis said. “To get to that job, you need to put gas in the car, and so that is going to be a priority in the near-term, prior to a payment on a car loan.” — Stephen Geis, LEHNS Capital “To get to that job, you need to put gas in the car, and so that is going to be a priority in the near-term, prior to a payment on the car loan,” he said, noting that lenders may see higher delinquencies by late spring or early summer. The U.S. national fuel price rose 27.1% year over year on March 24, averaging $3.977, according to data from the American Automobile Association. Used-vehicle values may also fall across less fuel-efficient vehicles such as trucks and larger SUVs if high gas prices are sustained, Geis added. Additionally, subprime auto consumers may have more challenges in financing vehicles, Cedric Moore , director of lender relations at refinancer iLending , told AFN . More lenders are tightening their underwriting standards as subprime auto delinquencies continue to rise, he said. “Right now, early payment defaults are at 7%, which is a decade high. This is higher than during the recession.” — Cedric Moore, iLending “Right now, early payment defaults are at 7%, which is a decade high. This is higher than during the recession,” Moore said. “A lot of these origination shops that played heavily on origination are getting crushed because of early payment defaults.” Lenders may also be shifting to prioritize prime and near-prime consumers amid subprime headwinds, he said. “Some of these auto lenders or fintech aggregators, marketplaces like ourselves, just do not have the bandwidth or do not have the marketing to target [subprime] borrowers,” he said. Relief in refi Consumers with FICO scores above 680 or 700, facilitated most refinance volume growth in 2026 and late 2025, Moore said. “That near-prime to prime space is really opening up a lot of opportunities for credit unions that are historically a little bit more risk-averse, and those [segments] are seeming to perform a lot better,” he said. Meanwhile, refinance aggregator Caribou Financial ’s refinance application volume from subprime consumers rose 130% YoY in February, President Eric Stradley told AFN . Subprime consumers made up around 35% of refinance originations in late 2025, he said. The increase in subprime refinancing is a “direct reflection of some of the consumer uncertainty and overall spending power that folks are experiencing going down,” leading subprime borrowers to look for ways to save money through refinancing, Stradley said. Subprime auto lenders may lean into refinance because refinanced loans for subprime borrowers typically carry lower annual losses — around 1% to 1.5% for customers with credit scores ranging from 650 to 700 — while subprime auto financing carries 3% to 5% annual losses with customers in the same credit score range, Stradley said. “Annual losses in refinance are so much better than in purchase lending,” he said. “If you’re just sourcing loans from dealerships at original purchase, you don’t have payment history … you don’t know a lot about the customer. Get to the refi side … the customer has opted in to keeping their vehicle. … That positive selection is strong.” 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. Register by March 27 for early-bird savings. To see event agendas and register, visit autofinance.live .

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Iran war gas price hikes could boost refi, especially in subprime

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