Auto Credit Availability Improved Again in August

Access to auto credit improved again in August, according to the Dealertrack Credit Availability Index for all types of auto loans. Following tightening across all channels and all lender types in the spring, the summer has shown continuous improvement in credit access across most channels and all lender types, except new, which had a decrease. However, credit access remains tighter than a year ago and, for many channels, tighter than before the pandemic. The All-Loans Index increased 1.8% to 99.1 in August, the highest reading since November 2022 and reflected that auto credit was easier to get than any time in 2023. With the increase in August, access was tighter by 2.8% year over year, and compared to February 2020, access was flat.

Dealertrack Credit Availability Index

Auto loan access improved in July but was down year over year

All Auto Loans Index (Jan2019=100)

Credit Availability Factors Mixed in August

Movement in credit availability factors was mixed in August. Yield spreads narrowed, subprime share increased, and negative equity share increased, and those moves improved credit access for consumers. However, average terms lengthened, down payments declined, and approval rates fell, and those moves hurt credit access for consumers.

The average yield spread on auto loans in August narrowed by 49 basis points (BPs), so rates consumers saw on auto loans were more attractive in August relative to bond yields. The average auto loan rate increased by 32 BPs in August compared to July, while the 5-year U.S. Treasury increased by 81 BPs, resulting in a narrower average observed yield spread.

The approval rate decreased by 46 BPs in August and was down 1.1 percentage points year over year. The subprime share increased to 11.0% from 10.4% in August but was down 0.3 percentage points year over year.

The share of loans with greater than 72-month terms decreased by 0.8 percentage points and was down 2.3 percentage points year over year.

All Loan Channels Saw Credit Loosening in August, With CPO Improving the Most

Most channels saw improving credit availability in August, while new saw tightening. Certified pre-owned saw the most loosening. On a year-over-year basis, all channels were tighter, with used loans having seen the most tightening.

Credit Availability Improves Across All Lender Types

Credit availability loosened in August across all lender types. Credit Unions loosened the most. On a year-over-year basis, credit access was mixed across lender types, with auto-focused finance companies loosening and 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 provide a view of how credit access shifts over time.

Measures of Consumer Confidence Improved Again in August

The Conference Board Consumer Confidence Index® declined by 6.9% in August, as views of the present situation and future expectations both declined. Consumer confidence was up 2.4% year over year. Plans to purchase a vehicle in the next six months declined modestly but remained up year over year. The confidence index did not fall as much during the pandemic as the sentiment index from the University of Michigan. Both series declined in August after improving in June and July. The Michigan index declined 2.9% for the month but was up 19% year over year. The consumer’s view of vehicle buying conditions was unchanged from July and at the best level since February. The daily index of consumer sentiment from Morning Consult also measured declining sentiment in August, as the index declined 2.3% from the end of July. Expectations of the future had improved the most in June and July but lost ground in August. Gas prices increased in July and again in August but saw some relief in the final 10 days of August. According to AAA, the national average price for unleaded gas increased 1.0% in August to $3.82 per gallon, which was unchanged 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.

Jonathan Gregory

Senior Manager, Economic and Industry Insights

Jonathan Gregory is a Senior Manager on Cox Automotive’s economic and industry insights team, which works to find actionable insights for the industry posed by Cox Automotive clients. Jonathan works with the Sales, Finance, and Data Science organizations and creates innovative solutions often combining proprietary data from other Cox Automotive brands. Jonathan joined Cox Automotive in 2022.