In January 2025, access to auto credit remained relatively flat, according to the Dealertrack Credit Availability Index, which reported a slight improvement across all channels. The All-Loans Index stood at 95.4, unchanged from December but reflecting a 2.9% increase year over year. This marks the highest level of auto credit availability since March 2023, despite a slight downward revision in December’s figures.
Compared to January 2024, credit access in January 2025 showed significant improvement across all channels and lender types. Notably, non-captive new-vehicle sales saw the most substantial loosening, while independent used-vehicle sales experienced the least improvement. Credit unions were the most significant contributors to easing access over the past year, while auto-focused finance companies were the least flexible.
Several factors contributed to the overall flat trend in credit access during January:
Approval Rates
The approval rate for auto loans dropped by 160 basis points (BPs) in January. This decline, coupled with widening yield spreads, means fewer consumers were able to secure loans, and those who did face higher rates. Approval rates and their downward trajectory were among the most restrictive factors for consumers seeking financing.
Yield Spreads
The yield spread—the difference between auto loan rates and bond yields—expanded by 28 BPs in January, influenced by a rise in the 5-year U.S. Treasury rate by 18 BPs. The average auto loan rate increased by 46 BPs, marking the first rate hike since March 2024. As yield spreads widened, borrowing conditions became less favorable for consumers, leading to higher monthly payments and an increased overall cost of loans.
Subprime Loan Share
The subprime loan share rose by 100 BPs in January and showed a more substantial increase year over year. This surge in subprime loans, the largest since April 2024, improved access for some borrowers, particularly those with riskier credit profiles. This factor was among the most favorable for credit availability in the month.
Loan Term Length
The share of loans with terms greater than 72 months increased by 50 BPs, ending a four-month streak of declining long-term loans. Longer loan terms generally allow for lower monthly payments, but they also mean consumers will take longer to pay off their loans and ultimately incur more interest. This rise in loan terms was still the second-lowest share since September 2021.
Negative Equity
Loans with negative equity, where the borrower owes more on the car than its current value, saw a sharp increase of 120 BPs in January. While this signals worsening financial conditions for some consumers, it may also provide expanded access for borrowers who otherwise wouldn’t qualify.
Down Payment Percentage
The percentage of loans requiring down payments decreased by 10 BPs in January compared to the previous month and slightly from January 2024. While lower down payments can ease the financial burden on consumers, they also mean higher monthly payments and more interest over the life of the loan.
Sales Channels
January saw improvements in credit access across all sales channels, with certified pre-owned vehicle loans experiencing the most significant loosening. Meanwhile, used-vehicle loans from franchised dealers saw the least amount of loosening.
Lender Types
Lender performance varied. Credit unions experienced the most tightening, while banks showed the greatest loosening of credit conditions. Auto-focused finance companies also displayed tightening, although to a lesser degree.
Cox Automotive’s January 2025 Dealertrack Credit Availability Index highlights a mixed landscape for auto credit. On one hand, consumers have benefited from the growth in subprime loans, an increase in loans with negative equity, and a rise in long-term loans. However, tightening factors, such as decreasing approval rates and widening yield spreads, have offset these improvements, leaving the index flat.
While access to financing has generally improved, especially for certified pre-owned vehicles, conditions are less favorable overall due to higher interest rates and stricter approval criteria. The environment is also mixed for lenders, with banks and captives loosening their policies while credit unions and auto-focused finance companies adopt tighter lending standards.
