Nick Cherry
Dealerships and auto lenders are facing added pressure from rising consumer delinquencies, as higher borrowing costs, stretched household budgets and longer loan terms continue to affect vehicle affordability.
Nick Cherry, Divisional Chief Executive Officer of Ardent Credit Services and Phillips & Cohen Associates, told Canadian auto dealer that consumer credit stress remains a significant issue, even as some indicators have begun to stabilize in 2026.
Cherry cited Equifax figures showing that non-mortgage delinquencies have risen since 2024. While the pace of increase has slowed this year, he said the underlying affordability issues have not gone away.
“There are increasing signs of consumer financial stress in the shape of reliance on maintaining minimum payments on card debt, suggesting that household finances are becoming more stretched,” said Cherry.
He said the main drivers include higher borrowing costs, mortgage renewals at higher rates, persistent inflationary pressure and rising household debt burdens.
The auto finance market has followed a similar pattern, Cherry said, with delinquency rates rising from 2024 to 2025 before showing signs of stabilization this year.
“Again, underlying trends suggest consumer stress remains, as car values remain elevated, interest rates remain high and loan terms have increased to six to eight years in length to meet affordability needs,” said Cherry.
He said rising consumer insolvencies are another warning sign for lenders and dealers, because stress in auto finance can often precede broader unsecured debt problems.
For lenders, the result has been increased bad-debt provisioning and closer scrutiny of underwriting criteria, credit limits and borrower risk profiles.
“Interest rates have also increased, especially for sub-prime credit profiles, and there are signs of an overall reduction in the availability of credit for marginal borrowers,” said Cherry.
That matters directly to dealers because financing availability is central to the sales process. If fewer consumers qualify for credit, or qualify only at higher rates, it can affect showroom conversion, vehicle choice and F&I profitability.
“It is driving a decline in showroom sales conversion rates, as well as a shift towards a preference for used cars over new,” said Cherry. “F&I departments have traditionally been a major revenue source for dealerships. Overall reductions in the availability of credit, particularly for sub-prime borrowers, could have a material impact on dealer profitability.”
Cherry said lending institutions are tightening their approach, particularly with consumers who have marginal or sub-prime credit profiles.
“Put bluntly, yes, and particularly for borrowers with marginal or sub-prime credit profiles,” said Cherry. “Not only is there a shift from lenders towards more prime borrowers, but the continued level of general consumer credit stress is making loan affordability even more challenging and driving longer terms at lower car valuation ranges.”
He said that dynamics can further restrict credit availability and make it more difficult for some consumers to complete a vehicle purchase.
Ardent Credit Services, based in Liverpool, recovered the equivalent of more than $291 million Canadian in the U.K. in 2025. The company entered the Canadian market in June and says it is looking to bring a more technology-enabled and human-centred approach to debt recovery for lenders.
