Auto loan and credit accessibility improved for the third consecutive month in September, according to Cox Automotive’s Dealertrack Credit Availability Index.
After a slight decline in May, auto loan accessibility began to make marginal month-over-month headways. After recording a 1.8% improvement in August, Cox Automotive reports that credit access increased by 0.2% in September. Availability continued to grow across most loan types as financing companies continued to loosen restrictive lending policies instigated by economic headwinds earlier this year.
Despite the overall improvements, several factors prevented a greater increase in auto loan accessibility. These included longer average term lengths and wider yield spreads. Furthermore, it is still more difficult to obtain credit in 2023 than it was before the pandemic. Cox Automotive estimates that availability has decreased 5.9% from 2022 and 2.1% from February 2020.
In the coming months, auto loan providers will be paying close attention to several economic and political developments to determine whether they will relax credit restrictions. One of these is the government shutdown. Although Congress has postponed the deadline to avert a shutdown, the unexpected oust of Kevin McCarthy from the House speakership position has complicated negotiations. There are also signs the country may be headed towards a recession, although the anticipated impact is much less significant than in 2008. Nevertheless, for credit access to improve three months in a row, financing providers must have steadily gained more confidence in the American consumer since summer. It remains to be seen whether this confidence will strengthen or weaken by the end of the year.
