What Bloomberg Overlooked in Its Subprime Auto Story

A recent Bloomberg article examined nearly three million subprime auto loans packaged into securities between 2021 and 2023, tracing how some lenders handle borrowers who fall behind. It is detailed, but missing important perspective.

Let’s start with what the piece gets right. More American households are straining to keep up, and delinquencies among the most stretched borrowers have risen. Vehicle finance companies see that strain daily, and no one in this industry pretends a loan modification rescues every borrower. But as we have stated before, vehicle lenders want to keep their customers in their cars and want to work with them to do so.

But the analysis frames a lender’s two options for a struggling customer – rework the loan or repossess the car – as competing profit “playbooks.” What the reporters never seemed to ask is what borrowers want and what the alternative costs them. In fact, there is no costless option. Loan modifications might be best for customers in certain situations and recovering the asset a better resolution for struggling borrowers in other circumstances.

The data show how those cases resolve. The CFPB’s own January 2025 report on repossessions found that more than 99 percent of vehicles secured by the finance contracts it examined stayed with the buyer, and that monthly repossessions over a four-year stretch ranged between nearly zero and 0.75 percent of open accounts. Between 22 and 30 percent of repossessions ended with the vehicle returned to the borrower under an agreement resolving the delinquency. And while repossessions have risen from pandemic lows, the 2025 repossession rate was 27 percent below 2009’s on a credit base 35 percent larger. Lenders work to avoid repossession when a loan can be saved for a simple reason Bloomberg’s own analysis supports: they lose more money repossessing a car than working out the loan. When a lender extends a borrower’s term, it is not to trap a borrower; it is doing what is economically responsible and what its customer prefers.

Context matters on some of the alarming numbers, too, which Bloomberg supplies with its own caveats. The securitized loans it studied are roughly a quarter of subprime lending, and the cleaner quarter at that. Its headline delinquency figure, 8 percent among the most stretched cohort, means 92 percent of those borrowers are keeping up. The same modification tools the article treats skeptically are what kept repossessions at historic lows when the pandemic hit, as the CFPB report acknowledges, and lenders have responded to rising defaults the way sound underwriters should, by tightening standards.

There are also points worth noting. Servicing costs as a share of revenue is not a common yardstick in auto finance. And the article’s modification rate appears to count loans modified at least once over the life of a securitization, rather than modifications as a percentage of beginning-of-period balances, which is how lenders generally report the figure. Both choices make the headline comparisons difficult to square with the numbers that lenders publish. The baseline matters, too. The loans studied were originated in the unusual aftermath of the pandemic, when stimulus lifted credit profiles and used-vehicle values hit record highs. The article notes those vintages deteriorated faster than other years, so measuring against that anomalous baseline may overstate how much has changed, a nuance easily lost each time the article is cited.

The article also suggests auto lending sits in a “hazier realm” of oversight. The industry’s compliance and risk teams would beg to differ. States have regulated vehicle finance for decades, backed by licensing, examination, and enforcement; one state-licensed finance company underwent 86 state exams in the past ten years. Repossession itself is governed by state law, the Uniform Commercial Code, and federal statutes, with tort remedies and damages available when a repossession is not performed properly. Consumers receive billing statements, late notices, default notices, and pre-repossession notices, with rights to cure and reinstate along the way. As AFSA detailed in a February letter to Sen. Elizabeth Warren (D-MA), repossession is the long-tail end of a months-long process.

Which brings us to the warning in Bloomberg’s final paragraphs, the one policy makers should consider seriously. As established lenders tighten their standards, the article notes, consumers may be pushed toward newer or less transparent or ethical sources of credit. That is not a good outcome for consumers, especially those already feeling financially insecure. For millions of Americans, a car is the difference between working and not working, and regulated vehicle financing is how they afford one. The same is true for the millions of American jobs tied to the manufacturing, sale, and upkeep of vehicles. The answer to a household’s financial strain is not a policy that shrinks responsible, examined, regulated credit. It is ensuring that credit remains available, so the borrower with two jobs and a school run never has to turn to whatever fills the vacuum where a licensed lender used to operate.

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