On the Dash:
- Auto credit availability reached its 2025 high in December, with approval rates up and pricing more favorable.
- Longer loan terms and reduced down payments reflect ongoing affordability pressures for consumers.
- Lenders are loosening credit broadly but remain cautious on higher-risk subprime loans and negative equity.
Auto credit conditions improved in December, giving auto dealers a boost as more buyers qualify for financing. The Dealertrack Credit Availability Index rose to 99.6, its highest level of 2025 and the strongest reading since October 2022, reflecting continued easing in auto credit conditions.
According to Cox Automotive, the improvement was driven primarily by rising approval rates, lower loan pricing, and longer loan terms. Approval rates also increased to 73.7%, up 90 basis points from November and 80 basis points higher than in December 2024. Simultaneously, average contract rates fell 16 basis points to 10.3%, while yield spreads tightened, making loans more affordable for consumers.
Longer loan terms continued to gain popularity, with 27.3% of buyers extending their loans to 72 months to help manage monthly payments amid affordability pressures. Down payments also dipped slightly to 13.3%, and negative equity remained relatively contained at 52.9%, although both measures showed minor month-over-month increases.
However, credit availability improved across nearly all sales channels. Independent and all used channels posted the largest gains, while franchised and new-vehicle channels also posted gains. Certified-per-owned was the only channel to experience a small decline. Among lenders, captives led gains, followed by banks, finance companies, and credit unions, which signals a broader willingness to extend credit.
For the full year, the Dealertrack index averaged 97.3, up 3.4 points from 2024. Dealers can expect easier credit access for buyers to continue, driven by a mix of higher subprime lending, longer terms, and better pricing.
