WASHINGTON, Dec. 9, 2025 /PRNewswire/ — The American Financial Services Association (AFSA) today released its Consumer Credit Conditions (C3) Index for the third quarter of 2025, revealing a challenging quarter for consumer lenders offset by growing optimism about business conditions over the next six months.
The survey of AFSA member companies—leading providers of vehicle financing, personal installment loans, and other consumer credit products—showed current business conditions turned slightly negative in Q3, with a Net Improving Index (NII) of -5.9. This marks the first negative reading after four consecutive positive quarters.
“Consumer lenders faced headwinds in the third quarter as loan demand weakened and performance metrics deteriorated,” said AFSA Chief Economist, Tim Gill. “However, the Federal Reserve’s resumption of interest rate cuts in September and easing financial conditions are fueling significantly improved expectations for the months ahead.”
Key Findings:
- The outlook for the next six months improved dramatically, with the NII reaching +20.6, up from 0.0 in Q2 and the strongest reading since Q4 2024. Lenders expect improving overall loan demand (+26.5 NII) and substantially better funding costs (+57.6 NII).
- Funding costs showed continued improvement for the fifth consecutive quarter, with a current NII of +42.2, reflecting the impact of declining interest rates.
- Loan performance remains a concern, particularly for subprime borrowers. The current loan performance NII fell to -8.8, while expected subprime loan performance registered -44.4, highlighting stress among lower-income and higher-credit risk consumers.
- Both vehicle finance and personal installment loan providers share optimistic six-month outlooks despite near-term challenges, with positive expectations for demand and funding costs across both sectors.
The C3 Survey was conducted in October 2025 and reflects the views of consumer finance companies on key business indicators and the evolving lending environment.
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SOURCE American Financial Services Association
