The US auto loan market opened 2025 with a powerful surge in activity, reaching $45 billion in securitization volumes, the second-highest quarterly figure since 2019. Despite broader economic headwinds, the sector is benefiting from a “cautiously optimistic” outlook. This report, powered by Cardo AI’s Market Intelligence, analyzes the 65% quarter-over-quarter growth in volume and the underlying improvements in recovery rates and delinquency trends that are sustaining investor confidence.
Volume growth and asset demand
Investor demand rebounded sharply in Q1, with volumes climbing 65% over the previous quarter. While partly seasonal, the $45 billion total underscores deep market liquidity. Appetite remains concentrated in high-quality assets: 71% of issuances are prime loans, and over 90% of tranches carry top investment-grade ratings. This persistent “flight to quality” has kept spreads tight even as supply increases.
Credit quality and Vintage gains
Underwriting discipline is driving measurable improvements, particularly in the subprime segment. Subprime delinquencies in 2024 vintages improved by 1.5 percentage points year-over-year, following a 6-point gain since 2022. Prime portfolios remains exceptionally stable, with cumulative defaults capped at 0.25%. These trends are supported by a 28-point advantage in recovery rates for prime assets over subprime.
Key investment opportunities
Our analysis identifies three strategic areas for allocation:
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Captive lender lead: For the fifth straight quarter, captives outperformed banks with a 3.6% edge in collection effectiveness.
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The 6%–14% “Sweet Spot”: This interest rate bucket offers a superior risk-return balance, with default rates three times lower than high-yield (>14%) loans.
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Prime core: Prime remains the market bedrock, with default rates 20 times lower than subprime, offering the most resilient low-volatility profile.