Auto Credit Availability Improved Again in July

Access to auto credit improved again in July, 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, July marked a second month of continuous improvement of credit access across all channels and lender types, except captives which had a slight decrease. However, credit access remains tighter than a year ago and, for many channels, tighter than before the pandemic. The All-Loans Index increased 0.2% to 97.4 in July, which was the highest reading since March and reflected that auto credit was easier to get than in April, May, and June. With the increase in July, access was tighter by 5.2% year over year, and compared to February 2020, access was tighter by 1.8%.

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 July

Movement in credit availability factors was mixed in July. While yield spreads narrowed, approval rates increased, improving consumer credit access. However, average terms lengthened, the subprime share declined, down payments declined, and the negative equity share declined, and those moves hurt credit access for consumers.

The average yield spread on auto loans in July narrowed by 6 basis points (BPs), so rates consumers saw on auto loans were more attractive in July relative to bond yields. The average auto loan rate increased by 13 BPs in July compared to June, while the 5-year U.S. Treasury increased by 19 BPs, resulting in a narrower average observed yield spread.

The approval rate increased by 74 BPs in July but was down 1 percentage point year over year. The subprime share declined to 10.4% from 10.5% in July and was down 1.1 percentage points year over year.

The share of loans with greater than 72-month terms decreased 0.4 percentage points and was down 1.3 percentage points year over year.

All Loan Channels Saw Credit Loosening in July

All channels saw improving credit availability in July. Used loans saw the most loosening. On a year-over-year basis, all channels were tighter, with certified pre-owned (CPO) loans having seen the most tightening.

Credit Availability Mixed With Auto-Focused Finance Companies Loosening the Most

Credit availability was mixed in July across all lender types. Captives tightened, while auto-focused finance companies 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 show how credit access shifts over time.

Measures of Consumer Confidence Improved Again in July

The Conference Board Consumer Confidence Index® increased by 6.3% in July, as views of both the present situation and future expectations improved. Consumer confidence was up 22.8% year over year. Plans to purchase a vehicle in the next six months increased to the highest level in nine months and were up year over year. The confidence index did not fall as much during the pandemic as the sentiment index from the University of Michigan. Still, both series improved in June and July and were up substantially year over year against the peak of the inflation surge in 2022. The Michigan index increased 11.2% for the month and was up 39% year over year. Consumers’ views of buying conditions for vehicles rose again in July to the best level since February. The daily index of consumer sentiment from Morning Consult also measured improving sentiment in July, as the index posted a 2.8% gain over June. Expectations of the future improved the most in June and July and are now at the highest level since August 2021. A key worry for the two-month streak’s continuing is the increase in gas prices that accelerated at the end of July. According to AAA, the national average price for unleaded gas increased 6.8% in July to $3.78 per gallon, which was down 10% year over year. The average gas price had been down 27% year over year to start the month.

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.