The Dealertrack Credit Availability Index showed a rise in auto credit availability across all channels and lender types in October. The All-Loans Index reached 94.5, marking a 2.2% increase from September. However, it remains down 2.1% year-over-year. This month-over-month growth marks the most significant auto credit access increase since March 2022.
Increased approval rates, a higher share of subprime loans, and tightening yield spreads all contributed to easier auto credit access. Certified pre-owned loans improved the most, while credit availability for used loans increased the least.
Credit availability increased across all lender types, with credit unions experiencing the most significant loosening while auto-focused financing companies experienced the least. Despite this, auto-focused financing companies were still the only lenders offering increased credit access before the pandemic.
The average yield spread tightened by 52 basis points (BPs), with auto loan rates decreasing by 11 BPs from September. Subprime loans grew for the third consecutive monthly increase, with a 20 BP rise in October and a 1.2% rise year-over-year.
There were also significant changes in loan terms and equity. Loans with terms over 72 months dropped by 30 BPd, down 09.% year-over-year. Negative equity in loans declined 30 BPs from September but rose 1.6% to last year. Down payment rates were flat month-over-month but up 1.6% year-over-year.
Further, the Conference Board US Consumer Confidence Index revealed a significant increase in consumer assurance, rising by 9.6% in October. The most notable gains include consumer plans to purchase a vehicle in the next six months, which leaped to the highest level since December 2019. This increase in consumer sentiment, which also rose by 10.5% from last year, provides reassurance about the market’s stability.
The Federal Reserve’s decision to cut rates last week may also stimulate buyer interest. While auto loan rates are not directly tied to the federal funds rates, they may decrease in response as lending institutions find it less expensive to access capital. This potential reduction in interest rates, combined with the increased auto credit availability and enhanced consumer confidence, could stimulate buyer interest and bring more customers back into the showrooms, offering a hopeful outlook for future credit trends.
