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Data Point

Auto Credit Availability Stable in May


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Access to auto credit declined slightly in May as credit tightened across most channels and all lender types, according to the Dealertrack Credit Availability Index. The All-Loans Index was 94.8 in May, down only 0.1 from the upwardly revised April reading but up 0.9% year over year. The subprime share and negative equity share both declined, and those moves made credit access more challenging for consumers. However, the approval rate increased, yield spreads narrowed, term length increased, and down payments were up slightly, and the moves in those factors were beneficial for consumers for the month. Credit access in May was looser than a year ago in all channels except franchised used sales, where it was flat year over year. Credit access was also looser year over year for all lender types, with captives and credit unions loosening the most. By channel, used loans through independent dealers and new loans saw the most loosening year over year, while certified pre-owned (CPO) loans only loosened availability marginally. For the month, banks and captives saw standards tighten the most while used loans through independent dealers tightened the least.

Dealertrack Credit Availability Index1

Auto loan access worsened slightly in May and was up year over year

All Auto Loans Index (Jan2019=100)

Most May Credit Availability Factors Moved Against Consumers

Movement in credit availability factors was mixed in May. Subprime share decreased and the amount of negative equity declined, resulting in reduced credit access for consumers. On the other hand, yield spreads tightened, term lengths grew, down payments declined, and the approval rate increased, all of which were improvements for consumers. By channel, used loans through independent dealers and new loans through lenders other than captives saw the most loosening, while franchised used loans saw the most tightening. On a year-over-year basis, improvement was seen by most groups as used loans from independent dealers loosened the most, while certified pre-owned loans only saw a modest improvement in credit availability. Among lenders, all lenders tightened in May compared to April, and banks pulled back the most for the month, while credit unions loosened the most year over year.

The average yield spread on auto loans in May tightened by 18 basis points (BPs), so rates consumers saw on auto loans were more attractive in May relative to bond yields. The average auto loan rate decreased by 24 Basis Points (BPs) in May compared to April, while the 5-year U.S. Treasury decreased by 6 BPs, resulting in a narrower average observed yield spread.

The approval rate increased by 20 BPs in May but was down 2.4 percentage points year over year. The subprime share decreased to 12.5% from 13.2% in April and was up 1.2 percentage points year over year.

The share of loans with greater than 72-month terms increased by 10 BPs but was down 1.5 percentage points year over year.

Sales channels saw mixed credit availability in May. Used loans through independent dealers saw the most loosening for the second month in a row, while franchised used loans saw the most tightening. New sales in total also showed tightening conditions this month. On a year-over-year basis, used loans through independent dealers and new loans in total showed the most loosening, and used certified pre-owned loans saw slightly looser conditions compared to the same time last year, and used sales through franchised dealers saw unchanged credit conditions.

Credit Availability Was Down Across All Lender Types in May

Credit availability was down in May for all lender types. Auto-focused finance companies tightened the least, while banks again saw the most tightening. On a year-over-year basis, credit access was loosened the most for credit unions, with finance companies only showing looser conditions by about 1 percentage point against May 2023.

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 Were Mixed in May

The Conference Board Consumer Confidence Index® increased by 4.6% in May as views of both the present situation and the future improved. Still, views of the future improved substantially and more than erased April’s decline in that index. Consumer confidence was down 0.5% year over year. Plans to purchase a vehicle in the next six months was unchanged compared to April and May last year. According to the sentiment index from the University of Michigan, consumer sentiment declined 10.5% in May against April but was up 17.1% year over year. The median consumer expectation for inflation in a year increased to 3.3%, its highest level since November, but the expectation for five years was steady at 3.0%. The consumer’s view of buying conditions for vehicles declined to the lowest level since November as the view of interest rates deteriorated. The daily index of consumer sentiment from Morning Consult was again volatile in May and declined by 2.1% for the month, leaving the index up by 6.9% year over year. Gas prices also fell in May, which may boost consumer sentiment in the coming weeks. The national average price for unleaded gas from AAA decreased 3.2% from the end of April to $3.54 per gallon, which was unchanged from the prior 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 10th 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.

Jeremy Robb
Senior Director of Economic and Industry Insights

Jeremy Robb leads a team at Cox Automotive that interfaces directly with clients and executive leadership across sales, strategy and finance utilizing his background helping companies consume data and insights to make better business decisions. He has been focused on finance and strategy for large corporations in the financial services and automotive industry for the past 20 years. Jeremy joined Cox Automotive in 2018 after spending 6 years at Nissan where he led functions in finance and remarketing. He is based in Nashville, Tennessee.

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