Author: Andre Martin Hobbs
I spend my time in the operational reality of dealership performance, lender alignment, lead quality, and what actually converts through sales and F&I. So I do not listen to industry podcasts looking for “surprises.” I listen for two things: signal and usable framing.
A recent Auto Remarketing Podcast episode hosted by Nick Sulavic featuring Shams Blanc, Vice President of Auto Scores at FICO, delivered exactly that. The themes are familiar to anyone working seriously in auto finance: affordability pressure, underwriting evolution, and shifting consumer behavior. But the way Shams framed the moment, and the current data points he shared, are worth repeating because they help sharpen how we talk about 2026 with dealers, lenders, and partners.
Affordability is still the headline. Total transportation cost is the real constraint.
Affordability is not a new topic. What is changing is how many cost variables are moving at the same time, and how fast they are moving.
Shams laid out several stacked pressures that are reshaping borrower performance and lender strategy:
- Subprime delinquencies have climbed to record highs, with more than 6 percent of subprime auto loans 60 days past due or worse, the highest level since the Great Recession.
- Average new car prices crossed $50,000 for the first time, pushing consumers toward older used inventory to keep payments workable.
- Insurance premiums are up almost 55 percent since 2020.
- Maintenance costs jumped 15 percent this year alone.
- The annual cost of owning and operating a vehicle is now over $12,000.
- Rates are still a major load, with average loan rates around 9 percent on new and near 14 percent on used for borrowers with decent credit, and higher for subprime.
From a dealer and lender outcomes standpoint, this all collapses into one operational truth: when the cost of ownership is volatile, the margin for error in deal structure and customer fit gets much smaller.
The framing that matters: payment power versus payment sustainability
This was the most reusable concept in the episode.
Traditional underwriting has been strong at assessing what Shams described as payment power. Can the borrower qualify today based on credit score, loan to value, payment to income, and standard eligibility metrics.
But what is fundamentally different in the current environment is the growing need to assess payment sustainability.
A borrower may qualify for a $750 monthly payment today, but sustainability asks whether that payment still holds when insurance rises again, when maintenance costs spike, or when household budgets tighten further.
That distinction matters because it changes what “good” looks like:
- It is not just about getting a deal approved.
- It is about structuring deals that are resilient to ownership cost volatility.
- It is about reducing late stage collapses and improving long term performance.
Shams positioned cash flow based underwriting as an increasingly essential tool in that shift. By looking at real time transaction data and income patterns alongside traditional scoring, lenders can improve approvals while reducing defaults. He gave a practical example: a gig worker with irregular income might be rejected by conventional scoring, but cash flow patterns may reveal consistent earnings and responsible money management that supports a solid auto loan.
The point is not that credit scores are going away. The point is that decisioning is becoming more context rich, and lenders who incorporate that context will have an edge.
Student loans are changing credit tiers, but the car remains a priority
Shams also referenced the FICO and Cox Automotive work examining how student loan delinquency reporting reshaped credit profiles.
The refreshed findings he shared included:
- Almost 3 million auto loan borrowers had a student loan delinquency reported on their credit file.
- 23 percent of those borrowers saw a credit score hit of 100 points or worse.
- Among consumers under 30, 30 percent saw that same 100 point drop.
- 4 percent of auto borrowers with student loan delinquencies were in subprime below 620 simply due to the student loan delinquency impact.
What I consider the most operationally important insight is the payment priority behavior: borrowers were four times more likely to pay their auto loan than their student loan.
That matters because it supports two practical directions we are already seeing in the market:
- Lenders need segmented strategies for “downgraded” borrowers whose tier shift is driven by student loan reporting rather than broad financial instability.
- Dealers and lender partners should be careful about writing off customers based purely on a score movement when other indicators suggest the auto obligation will remain high priority.
Gen Z is credit aware and expects transparency
The episode also reinforced something dealers experience every day: younger buyers are more informed and less patient with vague explanations.
Shams noted that consumers are more credit aware than in prior years, and that Gen Z checks credit frequently and expects transparency and education. For lenders and dealers, this creates both challenge and opportunity.
The advantage goes to those who communicate clearly:
- Explain why a decision was made.
- Show how down payment, term, and vehicle choice impact affordability over time.
- Provide a realistic path to improvement when a customer is declined or counteroffered.
Transparency is no longer only a compliance issue. It is part of acquisition and retention.
Three practical recommendations I agree with heading into 2026
Shams closed with a simple three part framework that I think aligns with what high performers are already prioritizing:
- Shift from payment power to payment sustainability
Add cash flow signals, model total cost of ownership volatility, and stress test affordability under multiple scenarios. - Capture underserved markets through enhanced risk assessment
Segment borrowers affected by student loan reporting and add second look workflows for applicants with strong cash flow patterns. - Build trust through transparency with credit aware consumers
Invest in education, clear pricing and affordability tools, and communication that supports long term customer outcomes.
Final thought
If I had to summarize the episode in one line: the question is no longer “can they make the payment today.” The question is “will the total cost of transportation remain affordable long enough for this to be a stable deal.”
That shift is not academic. It affects approvals, conversion, deal structure, and customer experience. And it is a strong signal for how auto finance, and the dealership ecosystem around it, will compete in 2026.
