The deterioration isn’t stopping the lending machine. It is creating more securities to sell. The risk doesn’t disappear when the loan gets packaged into a bond. It just gets distributed to whoever owns the bond.
Delinquencies are at records, so naturally Wall Street is packaging more of these loans than ever.
Subprime auto ABS issuance is on track for its biggest year on record, already near a full year's volume with months left to go.
Yield-starved investors are buying bonds backed by… pic.twitter.com/4xNeglvbDm
— Kurt S. Altrichter, CRPS® (@kurtsaltrichter) September 29, 2026
S&P rated a new $518 million First Investors auto ABS deal backed by subprime and nonprime loans. Its expected cumulative net loss was 10.75%, meaning the deal was structured around substantial expected losses before it even came to market.
https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3633085
Auto Finance News reported that September issuance was running with tight spreads and strong investor demand. Several auto ABS deals exceeded $1 billion, and one market participant described it as a good time for issuers.
KBRA’s August data showed the split underneath the market. Prime auto ABS remained relatively stable, while non-prime annualized net losses jumped 67 basis points in one month. Non-prime losses were also 34 basis points higher than a year earlier.
https://www.kbra.com/publications/nGfSyykg/u-s-auto-loan-abs-indices-august-2026?format=web
The deterioration is showing up in recoveries too. dv01 reported July loss severity at 56.5%, the highest level in its available loan-level history. It also said charge-offs had reached levels seen in 2019.
https://www.dv01.co/resources/research/performance-report-subprime-auto-july-2026/
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