Auto Credit Availability Tightened in April

Access to auto credit tightened in April, according to the Dealertrack Credit Availability Index for all types of auto loans. Following varied moves in vehicle channels and by lender in March, credit access tightened across all channels and all lender types in April. The All-Loans Index declined 1.5% to 96.8 in April, the lowest reading since February 2021 and reflected that auto credit was harder to get in the month than every month since then. With the decline in April, access was tighter by 8.5% year over year, and compared to February 2020, access was tighter by 2.4%.

Dealertrack Credit Availability Index

Auto loan access declined in April and was down year over year

All Auto Loans Index (Jan2019=100)

Credit Availability Factors Mixed in April

Movement in credit availability factors was mixed in April. Yield spreads narrowed, average terms lengthened, and down payments declined, and those moves improved credit access for consumers. However, decreases in the approval rate, subprime share, and negative equity share hurt consumer credit access.

The average yield spread on auto loans in April narrowed by 20 basis points (BPs), so rates consumers saw on auto loans were more attractive in April relative to bond yields. The average auto loan rate declined by 49 BPs in April compared to March, while the 5-year U.S. Treasury declined by 30 BPs, resulting in a narrower average observed yield spread.

The approval rate declined 0.4 percentage points in April but was down 2.4 percentage points year over year. The subprime share dropped to 11.7% from 13.4% in March and was down 1.5 percentage points year over year.

The share of loans with more than 72-month terms increased 0.8 percentage points but was down 0.4 percentage points year over year.

All Loan Channels Saw Credit Tightening in April

Unlike March, which saw tightening in used and loosening in new, all channels saw declining credit availability in April. Independent used loans saw the most tightening, while new loans from non-captives saw the least tightening. On a year-over-year basis, all channels were tighter, with certified pre-owned (CPO) loans having seen the most tightening.

Credit Availability Declines for All Lender Types

Credit availability also declined in April across all lender types. Credit unions tightened the most, while auto-focused finance companies tightened the least. On a year-over-year basis, credit access was tighter across all lender types, with auto-focused finance companies tightening the least while credit unions tightening 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 show how credit access shifts over time.

Measures of Consumer Confidence Mixed in April

The Conference Board Consumer Confidence Index® declined by 2.6% in April, as views of the present situation increased by 1.5%, but future expectations declined by 8.0%. Consumer confidence was down 6.7% year over year. Plans to purchase a vehicle in the next six months declined to the lowest level since November 2021. The confidence index did not fall as much during the pandemic as the sentiment index from the University of Michigan, and the two series diverged again in April. The Michigan index increased 2.4% in April but was down 2.6% year over year. Views of current economic conditions and expectations improved in April. Consumers’ views of vehicle buying conditions improved slightly in April and remained much better than a year ago. The daily index of consumer sentiment from Morning Consult also measured improving sentiment in April, increasing by 4.8%. Consumer attitudes have been sensitive to the price of gasoline for over a year now. Gas prices increased early in April but then declined in the second half of the month. According to AAA, the national average price for unleaded gas increased 3.0% in April to $3.61 per gallon as of April 30, down 14% 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.