First-quarter data show automotive lenders “faced particularly difficult conditions.”

Research by the American Financial Services Association found a drop in auto loan demand by high-income consumers as subprime demand rose. The disparity seems concerning since prime shoppers have helped buoy U.S. vehicle sales in an inflation-constrained market.

The association's Consumer Credit Conditions Index, conducted in April, asked financing providers to share their views on current consumer-lending conditions and their six-month outlook. In the vehicle financing sector, overall current business conditions were painted as negative, with a Net Improving Index of -18.5.

The index is calculated as the percentage of participants reporting that conditions improved minus the percentage reporting that conditions worsened.

The six-month outlook, though positive at +7.1, is a sharp drop from the previous quarter, which had a +18.2 six-month outlook.

For both current conditions sentiment and future outlook, customer demand for loans across all markets, including personal installment loans, was down while the demand for subprime loans was up.

“The divergence between the survey results for vehicle finance and installment lending in Q1 suggests high-income groups are pulling back, but low-income groups are borrowing out of necessity,” said association Vice President, Research and Chief Economist Timothy Gill.

According to the association, it was the lowest overall loan demand since it launched the survey in 2024 and the highest subprime loan demand since it began tracking that figure a year ago. It pointed out that while the economy is expanding at a modest pace, affordability is still a critical issue as inflation and fuel and energy costs rise.