U.S. Auto Finance Company 2025 Outlook: Auto Pilot Is On but Keep Your Hands on the Wheel

This commentary reviews the 2025 U.S. auto finance outlook.

Key highlights include:

-- Morningstar DBRS expects a stable credit rating environment for the U.S. auto finance sector in 2025.

-- We expect earnings for the large auto finance companies to remain resilient in 2025.

-- We anticipate that prime auto loan credit performance will remain sound as the credit cycle matures. Meanwhile, we expect nonprime auto loan credit performance to remain challenged given the pressure on lower-income household budgets from high living costs and elevated interest rates.

"Although not reflected in our outlook, there are risks to the downside that bear watching. The potential for tariffs and trade disputes to lead to slower economic growth that results in a weakening labor market and higher inflation could result in weaker than expected credit performance and place pressure on auto finance company earnings," said Mark Nolan, Vice President - NA Financial Institution Ratings.