Auto Credit Availability Worsens Following Three Months of Improvement

According to the Dealertrack Auto Credit Availability Index for all types of auto loans, access to auto credit worsened in November. Following loosening across all channels and all lender types for most of the fall months, credit access is expected to tighten across all channels and most lender types, except for captives, as fall ends. However, credit access remains tighter than a year ago, and channels are tighter than before the pandemic. The All-Loans Index decreased by 0.8% to 94.8 in November. With the decrease in November, access was tighter by 4.2% year over year, and compared to February 2020, access was tighter by 4.0%.

Dealertrack Credit Availability Index¹

Auto loan access worsened in November and was down year over year

All Auto Loans Index (Jan2019=100)

November Credit Availability Mixed Across Channels

Movement in credit availability factors was mixed in November. Yield spreads increased, subprime share decreased, average term shortened, fewer deals had negative equity, and the down payment amount increased, and those moves hurt credit access for consumers. Approval rates were steady in November but at the lowest level this year.

The average yield spread on auto loans in November widened by 10 basis points (BPs), so rates consumers saw on auto loans were less attractive in November relative to bond yields. The average auto loan rate decreased by 19 BPs in November compared to October, while the 5-year U.S. Treasury increased by 29 BPs, resulting in a wider average observed yield spread.

The approval rate increased by 9 BPs in November and was down 0.4 percentage points year over year. The subprime share decreased to 12.1% from 12.2% in October and was down 0.7 percentage points year over year.

The share of loans with greater than 72-month terms decreased by 47 BPs and was down 1.7 percentage points year over year.

Credit Availability Tightened Across All Channels in November

Credit availability tightened across all channels in November. New-vehicle loans saw the least tightening, while certified pre-owned (CPO) loans saw the most tightening. On a year-over-year basis, all channels were tighter, with CPO loans having seen the most tightening.

Credit availability tightened in November across all lender types, except for captives, which loosened slightly. Credit unions tightened the most. On a year-over-year basis, credit access to all lenders was tighter, with 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 Saw Mixed Trends in November

 The Conference Board Consumer Confidence Index® increased by 2.9% in November, as future expectations improved by 7% and drove most of the increase. Consumer confidence was up 0.6% year over year. Plans to purchase a vehicle in the next six months increased 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. Both series declined between July and November, and the Michigan index declined another 3.9% in November. However, that index ended November up 1.5% from the mid-month reading. The final index number for the month was up 8.1% year over year. Consumer expectations for inflation increased, with median expectations for inflation over the next year at the highest level since April. The consumer’s view of buying conditions for vehicles declined slightly as views of prices were less negative, but views of interest rates deteriorated. The daily index of consumer sentiment from Morning Consult measured only a small change in November, as the index increased 0.1% from the end of October. Gas prices declined further in November. According to AAA, the national average price for unleaded gas fell 6.2% to $3.25 per gallon as of November 30, which was down 6% year over year and was the lowest average price since early January.

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.

¹ In 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.