Auto Credit Availability Tightened Again in December

Access to auto credit tightened again in December, according to the Dealertrack Credit Availability Index for all types of auto loans. The All-Loans Index declined 2.1% to 99.1 in December, reflecting that auto credit was harder to get in the month compared to November. The decline in access reflected conditions that were tightest since September 2021. With the decline in December, access was tighter by 2.5% year over year, and compared to February 2020, access was tighter by 0.1%.

Dealertrack Credit Availability Index

Auto loan access declined again in December, leaving access down year over year.

Most Factors Moved Against Consumers in December

Most credit availability factors moved against consumers in December, as yield spreads widened, the subprime share declined, terms shortened, the share of loans with negative equity declined, and down payments increased. The average yield spread on auto loans widened, so rates consumers saw on auto loans were less attractive in December relative to bond yields. The average auto loan rate increased by 7 Basis Points (BPs) in December compared to November, while the 5-year U.S. Treasury declined by 27 BPs, resulting in a wider average observed yield spread. The one factor with positive movement for consumers in December was a small increase in the approval rate.

The subprime share declined to 11.0% in December from 11.5% in November and was down 0.8 percentage points year over year. The approval rate increased 0.5 percentage points but was down 3.1 percentage points year over year. Those were the biggest changes over the last year in addition to the rate changes.

All loan types saw tightening in December, and new loans tightened the most. On a year-over-year basis, most channels were tighter except certified pre-owned (CPO) loans. New loans have seen the most tightening over the last year.

Credit Access Tightens Across All Lender Types

Credit access tightened across all lender types in December with credit unions tightening the most. On a year-over-year basis, credit access was tighter across all lender types except auto-focused financed companies. Over the last year credit unions having tightened the most.

Each Dealertrack Auto Credit Index tracks shifts in loan approval rates, subprime share, yield spreads and loan details including term length, negative equity, and down payments. The index is baselined to January 2019 to provide a view of how credit access shifts over time.

Measures of Consumer Confidence Higher in December

The Conference Board Consumer Confidence Index® increased 6.8% in December, as both present situation and future expectations measures improved. Plans to purchase a vehicle in the next six months improved slightly and remained up year over year. The confidence index has not declined as much this year as the sentiment index from the University of Michigan, but that series also improved in December. The Michigan index increased 5.1%, driven primarily by improvement in the expectations index, which was up 7.7%. Consumers’ views of buying conditions for vehicles improved to the second-best level this year. The daily index of consumer sentiment from Morning Consult also measured improving sentiment in December, as that index was up 4% for the month. Sentiment improved in December as the price of gasoline fell to its lowest level in more than a year before increasing slightly at month’s end. According to AAA, the national average price for unleaded gas was $3.21 per gallon on Dec. 31 and down 2% year over year.

The Dealertrack Credit Availability Index is a monthly index based on Dealertrack credit application data and will indicate whether access to auto loan credit is improving or worsening. The index will be published around the 10^th of each month.