Auto credit access increased in September, marking the end of a five-month decline, according to the Dealertrack Credit Availability Index. The All-Loans Index rose to 92.8, a 0.4% increase from August, but remained 2.1% lower year-over-year. The improvement was driven by lower average auto loan rates, a higher share of subprime loans, and longer loan terms, which eased consumer access to credit.
Credit availability improved across most channels and lender types in September, with certified pre-owned loans seeing the most significant loosening. However, credit for independent used car sales tightened, though it remains better than pre-pandemic levels. Despite the improvements, overall credit access was still more restricted than last year, especially for certified pre-owned and used car loans.
Credit unions and banks led the charge in easing credit standards, while auto-focused finance companies showed less loosening. However, credit access from these companies is still tighter than pre-pandemic levels. Banks experienced the most significant tightening year-over-year, while auto-focused finance companies showed only slight easing.
Despite the increase in credit availability, the average auto loan yield spread widened by six basis points in September, indicating less favorable loan rates compared to bond yields. Auto loan rates dropped by 15 basis points from August, but the 5-year U.S. Treasury fell by 21 basis points, contributing to the wider spread. Approval rates declined by 50 basis points in September and were down 3.8 percentage points year-over-year, while the share of subprime loans rose for the second consecutive month.
Longer loan terms and the share of loans with negative equity also increased in September. The proportion of loans exceeding 72-month terms rose by 80 basis points, while loans with negative equity increased by 20 basis points for the fourth month in a row. Down payments fell by 20 basis points, although they remained higher than a year ago.
Consumer confidence presented mixed results in September. While the Conference Board’s Consumer Confidence Index fell 6.5%, the University of Michigan’s consumer sentiment index showed a 3.2% improvement. Vehicle purchase plans saw a slight increase, and gas prices continued to decline, further supporting consumers’ buying power.
