Analysis of Current Auto Loan Market Trends
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 10 hours ago
0mins
Source: CNBC
- Stable Consumer Burden: Despite rising car prices and interest rates, the percentage of income consumers spend on automotive expenses has remained around 10% since 2019, indicating a stable burden on consumers and reflecting market resilience.
- Trend of Extended Loan Terms: An increasing number of consumers are opting for longer loan terms to lower monthly payments, with data showing that 90.2% of new vehicle loans involving trade-ins with negative equity have terms of at least 72 months, and 43% extend to 84 months, potentially leading to higher debt risks for consumers when trading in vehicles.
- Escalating Negative Equity Issues: As of April 2023, approximately 26% of used vehicle purchases involved negative equity, with an average negative equity of $5,105, a 35% increase from 2019, indicating greater financial pressure on consumers when trading in vehicles.
- Market Price Comparison: According to Cox data, the average listed price of a used vehicle was $25,390 in March, compared to an average new vehicle price of $48,667, highlighting the relative stability of the used car market and reflecting consumers' economic considerations when choosing loans.
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Analyst Views on COF
Wall Street analysts forecast COF stock price to rise
19 Analyst Rating
16 Buy
3 Hold
0 Sell
Strong Buy
Current: 192.590
Low
256.00
Averages
280.42
High
310.00
Current: 192.590
Low
256.00
Averages
280.42
High
310.00
About COF
Capital One Financial Corporation is a diversified financial services holding company with banking and non-banking subsidiaries. The Company offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. It operates through three segments: Credit Card, Consumer Banking and Commercial Banking. The Credit Card segment consists of its domestic consumer and small business card lending, and international card businesses in the United Kingdom and Canada. The Consumer Banking segment consists of its deposit gathering and lending activities for consumers and small businesses, and national auto lending. The Commercial Banking segment consists of its lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Its principal operating subsidiary is Capital One, National Association, which offers banking products and financial services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Capital One's Earnings Report Highlights Increasing Consumer Strain
- Earnings Miss: Capital One reported Q1 revenue of $15.2 billion and an adjusted EPS of $4.42, down 2% year-over-year and missing analyst expectations of $15.4 billion and $4.55, indicating increasing financial strain on consumers.
- Rising Loan Loss Provisions: The company's loan-loss provision surged to $4.07 billion, exceeding estimates of $3.77 billion and significantly up from $2.37 billion a year ago, highlighting escalating bad debt risks that could impact future profitability.
- Increasing Delinquency Rates: TransUnion reported that the percentage of credit card holders 90 days late on payments rose to 2.53%, nearing a two-year high, reflecting consumer vulnerability amid record-high credit card balances and ongoing spending pressures.
- Widespread Industry Challenges: The struggles are not limited to Capital One, as both Papa John's and McDonald's reported revenue and earnings misses, underscoring the broader economic challenges affecting various sectors, which could lead to weakened overall market performance.
See More
Rising Consumer Loan Defaults Signal Economic Concerns
- Rising Loan Defaults: Capital One Financial's Q1 report reveals a loan-loss provision of $4.07 billion, exceeding the $3.77 billion estimate, indicating increasing financial strain on consumers that could impact the company's future profitability.
- Consumer Spending Risks: While consumer spending is up, the rise in bad debt is concerning, with Capital One's charge-offs increasing from $2.74 billion to $3.85 billion, reflecting negative economic impacts that may lead to a contraction in the overall consumer market.
- Restaurant Sector Challenges: Reports from Papa John's and McDonald's indicate that the former experienced a 6.4% decline in same-store sales, while the latter relied heavily on value meals to navigate economic pressures, suggesting even strong brands are not immune to economic slowdowns, potentially affecting their market share.
- Increasing Credit Card Delinquencies: TransUnion reports that the percentage of credit card holders 90 days late on payments has risen to a near two-year high of 2.53%, amidst record credit card balances of $1.12 trillion, raising concerns about consumer financial health that could trigger broader economic repercussions.
See More
Capital One's Q1 Earnings Miss Raises Consumer Concerns
- Earnings Miss: Capital One reported Q1 revenue of $15.2 billion and an adjusted EPS of $4.42, down 2% year-over-year and missing analyst expectations of $15.4 billion and $4.55, indicating increasing financial strain on consumers.
- Rising Loan Loss Provisions: The company's loan-loss provision surged to $4.07 billion, exceeding estimates of $3.77 billion and significantly up from $2.37 billion a year ago, highlighting escalating credit card debt risks.
- Spending vs. Bad Debt: While cardholder spending has increased, charge-offs rose sharply from $2.74 billion in Q1 2025 to $3.85 billion this year, reflecting a deteriorating financial situation for consumers.
- Widespread Industry Challenges: The struggles are not limited to Capital One, as companies like Papa John's and McDonald's also reported revenue and earnings misses, underscoring the broader economic impact on consumer spending capacity across various sectors.
See More
Analysis of Current Auto Loan Market Trends
- Stable Consumer Burden: Despite rising car prices and interest rates, the percentage of income consumers spend on automotive expenses has remained around 10% since 2019, indicating a stable burden on consumers and reflecting market resilience.
- Trend of Extended Loan Terms: An increasing number of consumers are opting for longer loan terms to lower monthly payments, with data showing that 90.2% of new vehicle loans involving trade-ins with negative equity have terms of at least 72 months, and 43% extend to 84 months, potentially leading to higher debt risks for consumers when trading in vehicles.
- Escalating Negative Equity Issues: As of April 2023, approximately 26% of used vehicle purchases involved negative equity, with an average negative equity of $5,105, a 35% increase from 2019, indicating greater financial pressure on consumers when trading in vehicles.
- Market Price Comparison: According to Cox data, the average listed price of a used vehicle was $25,390 in March, compared to an average new vehicle price of $48,667, highlighting the relative stability of the used car market and reflecting consumers' economic considerations when choosing loans.
See More
Federal Reserve Holds Rates Steady, Some Banks Cut Yields
- Stable Rate Policy: The Federal Reserve's decision to maintain the federal funds rate between 3.5%-3.75% is generally positive for savers; however, some banks have still lowered their high-yield savings account rates, indicating competitive pressures in the market.
- Yield Cuts by Banks: According to a BTIG report, three major banks—Capital One, Synchrony, and Marcus by Goldman Sachs—have recently reduced their annual percentage yields, following a cut by Ally Financial, reflecting adjustments in banking strategies under yield pressure.
- Shifting Market Expectations: While analysts believe the Fed will not cut rates, bank earnings reports indicate robust consumer spending and lending in the U.S., suggesting that growth expectations remain intact, which could influence future rate decisions.
- Deposit Product Yield Comparison: Despite some banks lowering rates, Bread Financial and LendingClub maintain a 4% yield, but they are expected to follow suit with cuts, highlighting the ongoing competition for high-yield deposit products in the market.
See More
JP Morgan Maintains Overweight Rating on Mastercard Post Visa's Q2 Earnings Beat
- Rating Maintenance: JP Morgan has decided to maintain its Overweight rating on Mastercard, indicating confidence in the company's future performance, particularly against the backdrop of ongoing growth in the payments industry.
- Price Target Set: The firm has set a price target of $507.62 for Mastercard, reflecting optimistic expectations regarding its future profitability, which aligns with Visa's recent earnings performance.
- Market Reaction: Visa's Q2 earnings beat expectations may provide support for Mastercard's stock price, further bolstering investor confidence in the company.
- Industry Outlook: As digital payments continue to gain traction, Mastercard's position in the global payments market is expected to strengthen, and JP Morgan's rating and price target reflect a positive outlook on this trend.
See More
Capital One's Earnings Report Highlights Increasing Consumer Strain
- Earnings Miss: Capital One reported Q1 revenue of $15.2 billion and an adjusted EPS of $4.42, down 2% year-over-year and missing analyst expectations of $15.4 billion and $4.55, indicating increasing financial strain on consumers.
- Rising Loan Loss Provisions: The company's loan-loss provision surged to $4.07 billion, exceeding estimates of $3.77 billion and significantly up from $2.37 billion a year ago, highlighting escalating bad debt risks that could impact future profitability.
- Increasing Delinquency Rates: TransUnion reported that the percentage of credit card holders 90 days late on payments rose to 2.53%, nearing a two-year high, reflecting consumer vulnerability amid record-high credit card balances and ongoing spending pressures.
- Widespread Industry Challenges: The struggles are not limited to Capital One, as both Papa John's and McDonald's reported revenue and earnings misses, underscoring the broader economic challenges affecting various sectors, which could lead to weakened overall market performance.
See More
Rising Consumer Loan Defaults Signal Economic Concerns
- Rising Loan Defaults: Capital One Financial's Q1 report reveals a loan-loss provision of $4.07 billion, exceeding the $3.77 billion estimate, indicating increasing financial strain on consumers that could impact the company's future profitability.
- Consumer Spending Risks: While consumer spending is up, the rise in bad debt is concerning, with Capital One's charge-offs increasing from $2.74 billion to $3.85 billion, reflecting negative economic impacts that may lead to a contraction in the overall consumer market.
- Restaurant Sector Challenges: Reports from Papa John's and McDonald's indicate that the former experienced a 6.4% decline in same-store sales, while the latter relied heavily on value meals to navigate economic pressures, suggesting even strong brands are not immune to economic slowdowns, potentially affecting their market share.
- Increasing Credit Card Delinquencies: TransUnion reports that the percentage of credit card holders 90 days late on payments has risen to a near two-year high of 2.53%, amidst record credit card balances of $1.12 trillion, raising concerns about consumer financial health that could trigger broader economic repercussions.
See More
Capital One's Q1 Earnings Miss Raises Consumer Concerns
- Earnings Miss: Capital One reported Q1 revenue of $15.2 billion and an adjusted EPS of $4.42, down 2% year-over-year and missing analyst expectations of $15.4 billion and $4.55, indicating increasing financial strain on consumers.
- Rising Loan Loss Provisions: The company's loan-loss provision surged to $4.07 billion, exceeding estimates of $3.77 billion and significantly up from $2.37 billion a year ago, highlighting escalating credit card debt risks.
- Spending vs. Bad Debt: While cardholder spending has increased, charge-offs rose sharply from $2.74 billion in Q1 2025 to $3.85 billion this year, reflecting a deteriorating financial situation for consumers.
- Widespread Industry Challenges: The struggles are not limited to Capital One, as companies like Papa John's and McDonald's also reported revenue and earnings misses, underscoring the broader economic impact on consumer spending capacity across various sectors.
See More
Analysis of Current Auto Loan Market Trends
- Stable Consumer Burden: Despite rising car prices and interest rates, the percentage of income consumers spend on automotive expenses has remained around 10% since 2019, indicating a stable burden on consumers and reflecting market resilience.
- Trend of Extended Loan Terms: An increasing number of consumers are opting for longer loan terms to lower monthly payments, with data showing that 90.2% of new vehicle loans involving trade-ins with negative equity have terms of at least 72 months, and 43% extend to 84 months, potentially leading to higher debt risks for consumers when trading in vehicles.
- Escalating Negative Equity Issues: As of April 2023, approximately 26% of used vehicle purchases involved negative equity, with an average negative equity of $5,105, a 35% increase from 2019, indicating greater financial pressure on consumers when trading in vehicles.
- Market Price Comparison: According to Cox data, the average listed price of a used vehicle was $25,390 in March, compared to an average new vehicle price of $48,667, highlighting the relative stability of the used car market and reflecting consumers' economic considerations when choosing loans.
See More
Federal Reserve Holds Rates Steady, Some Banks Cut Yields
- Stable Rate Policy: The Federal Reserve's decision to maintain the federal funds rate between 3.5%-3.75% is generally positive for savers; however, some banks have still lowered their high-yield savings account rates, indicating competitive pressures in the market.
- Yield Cuts by Banks: According to a BTIG report, three major banks—Capital One, Synchrony, and Marcus by Goldman Sachs—have recently reduced their annual percentage yields, following a cut by Ally Financial, reflecting adjustments in banking strategies under yield pressure.
- Shifting Market Expectations: While analysts believe the Fed will not cut rates, bank earnings reports indicate robust consumer spending and lending in the U.S., suggesting that growth expectations remain intact, which could influence future rate decisions.
- Deposit Product Yield Comparison: Despite some banks lowering rates, Bread Financial and LendingClub maintain a 4% yield, but they are expected to follow suit with cuts, highlighting the ongoing competition for high-yield deposit products in the market.
See More
JP Morgan Maintains Overweight Rating on Mastercard Post Visa's Q2 Earnings Beat
- Rating Maintenance: JP Morgan has decided to maintain its Overweight rating on Mastercard, indicating confidence in the company's future performance, particularly against the backdrop of ongoing growth in the payments industry.
- Price Target Set: The firm has set a price target of $507.62 for Mastercard, reflecting optimistic expectations regarding its future profitability, which aligns with Visa's recent earnings performance.
- Market Reaction: Visa's Q2 earnings beat expectations may provide support for Mastercard's stock price, further bolstering investor confidence in the company.
- Industry Outlook: As digital payments continue to gain traction, Mastercard's position in the global payments market is expected to strengthen, and JP Morgan's rating and price target reflect a positive outlook on this trend.
See More
