Auto credit access improved slightly in May, according to the latest Dealertrack Credit Availability Index. The All-Loans Index rose to 96.7, up from 95.5 in April, marking a 1.2-point month-over-month increase and signaling a continued easing in lending conditions.
Several key indicators contributed to the rise. Loan approval rates increased by 28 basis points (BPs), while the share of subprime borrowers receiving loans rose by 33 BPs, suggesting lenders are modestly relaxing credit standards. These changes may reflect stronger economic confidence or competitive pressure among lenders.
The average contract rate on loans rose from 11.12 percent in April to 11.28 percent in May, while the five-year Treasury yield climbed from 3.91 percent to 4.02 percent. This pushed the yield spread up by 5 BPs, indicating that lenders passed some of the rate pressure to borrowers while maintaining profitability.
Loan terms also continued to stretch longer, with the share of loans exceeding 72 months increasing by 53 BPs. This trend highlights consumer efforts to manage monthly payments, though it may lead to higher overall borrowing costs. At the same time, the share of borrowers with negative equity rose by 34 BPs, pointing to possible financial strain or faster depreciation relative to loan balances.
The average down payment edged up by 6 BPs to 9.58 percent, potentially reflecting either lender caution or consumer attempts to lower loan amounts.
Used-vehicle loans saw the most notable improvement in credit access across retail channels, followed by more modest gains in the new-vehicle market. Among lender types, credit unions and banks showed signs of loosening credit conditions, while captives held steady and auto-focused finance companies remained more cautious.
Compared to a year earlier, credit access in May was more favorable across most channels and lender types. The strongest year-over-year gains appeared in non-captive used-vehicle loans, with credit unions leading the shift. Independent used dealers, by contrast, showed minimal change.
Despite these positive shifts, rising contract rates and longer loan terms mean borrowers may face higher total costs. Lenders, meanwhile, appear to be cautiously expanding access while keeping an eye on risk indicators like negative equity.
