Auto Credit Availability Improved Again in March

Access to auto credit improved in March as credit loosened across all channels and all lender types compared to February, according to the Dealertrack Credit Availability Index. The All-Loans Index increased to 94.0 in March but remained down 1.5% year over year.

Credit availability has improved for two consecutive months and rose 1.1% month over month with the arrival of spring. Still, credit access remains tighter than a year ago in all channels and most lender types, except loans from auto finance companies. Compared to February 2020, credit access was tighter in all

Dealertrack Credit Availability Index¹

Auto loan access improved in March but remained down year over year

All Auto Loans Index (Jan2019=100)

Most March Credit Availability Factors Moves Against Consumers

Credit availability factors mostly moved against consumers in March. Yield spreads widened, term length shrank, and those moves reduced credit access for consumers. Meanwhile, the subprime share of loans increased, and approval rates increased, which were moves that showed improvement for consumers. The down payment share was unchanged but at the highest level in the history of the data series. By channel, used loans through independent dealers saw the least loosening while certified pre-owned loans saw the most amount of loosening. On a year-over-year basis, most channels were tighter, except used loans from independent dealers loosening. Among lenders, auto captive companies loosened the most in March, while auto-focused finance companies loosened the least year over year.

The average yield spread on auto loans in February widened by 47 BPs, so rates consumers saw on auto loans were less attractive in March relative to bond yields. The average auto loan rate increased by 48 Basis Points (BPs) in March compared to February, while the 5-year U.S. Treasury increased by 1 BP, resulting in a wider average observed yield spread.

The approval rate increased by 8 BPs in March and was down 2.5 percentage points year over year. The subprime share increased to 13.0% from 14.9% in March and was up 1.1% year over year.

The share of loans with greater than 72-month terms decreased by 2 BPs and was down 0.8 percentage points year over year.

All channels saw improved credit availability in March. Used certified pre-owned loans saw the most loosening in credit access during the month, while used loans from independent dealers saw the least loosening. On a year-over-year basis, all channels were tighter with used loans having seen the most tightening.

Credit Availability Improved Across All Lender Types in March

Credit availability also improved in March across all lender types. Auto captive companies saw the most loosening while auto-focused finance companies loosened the least. On a year-over-year basis, credit access was tighter across all lender types except for auto-focused finance companies, while banks 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.

Most Measures of Consumer Confidence Saw Strong Improvement in January

 The Conference Board Consumer Confidence Index® increased by 6.3% in January, powered by views of the present situation jumping 9.6% and to the highest level since March 2020. Consumer confidence was up 8.3% year over year. Plans to purchase a vehicle in the next six months declined to the lowest level since April and were down year over year. Consumer sentiment also improved in January, according to the sentiment index from the University of Michigan. The Michigan index increased 13.3% for the month and was up 21.7% year over year. Consumer expectations for inflation in a year declined to 2.9%, which was the same expectation for inflation in five years. The consumer’s view of buying conditions for vehicles increased to the highest level since the summer of 2021 as views of prices and interest rates were less negative. The daily index of consumer sentiment from Morning Consult changed little, down 0.6% in January but up 12.6% year over year. Gas prices increased in January. According to AAA, the national average price for unleaded increased 1.3% to $3.15 per gallon as of Jan. 31, which was down 10% 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.

¹In November 2023, the data behind the Dealertrack Auto Credit Availability Index was reset by our data sciences team as part of a migration to a new data management system. All points in the data set were reestablished, with January 2019 in the index set at 100 (as it had been previously). The All-Loans Index plot used in this post utilizes the new data set. The absolute numbers have shifted, but the trends and narrative have not. For more information, contact the Cox Automotive team.

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.