On the Dash:
- Auto credit access improved in September, resuming a broader trend of looser lending.
- Subprime loans rose to 14.2%, showing expanded access for higher-risk borrowers.
- Longer loan terms and slightly higher rates accompany improved financing options.
Credit availability for U.S. auto buyers ticked higher in September 2025, resuming a trend of looser lending after a slight pullback in August. The Dealertrack Credit Availability Index (CAI) rose to 98.1, up 0.2 points from 97.9, signaling improved access to auto financing across most segments.
Approval rates for auto loans remained steady at 74.4%, unchanged from August and up 2.3 percentage points from a year ago. Lenders are increasingly extending credit to subprime borrowers, with the share of loans to consumers with lower credit scores rising from 13.6% in August to 14.2% in September, and up 170 basis points compared to September 2024.
Average loan rates rose slightly, with the yield spread widening to 7.24 from 6.86 and the average contract rate increasing to 10.90% from 10.65%. At the same time, the five-year Treasury yield fell to 3.66% from 3.79%, indicating lenders are charging more to offset higher risks, while the cost of funds decreased. Longer loan terms are also becoming more common, with loans exceeding 72 months growing to 26.8% of the market, up 1.3 percentage points from August. Negative equity among borrowers rose to 54%, while average down payments declined slightly to 13.5%.
Credit improvements were broad-based, with the most substantial gains in independent used-vehicle dealerships. Certified pre-owned and all used segments also saw increases, while franchised used and non-captive new segments remained largely stable. Banks led lender gains with a 1.6% increase in availability, followed by auto-focused finance companies at 0.9% and credit unions at 0.4%. Captive finance arms remained more cautious, posting a 0.9% decline.
Year-over-year comparisons show consistent gains across most channels and lender types, particularly in non-captive new and franchise used vehicles. Banks and finance companies led the improvement, while credit unions and captives showed more measured growth.
For consumers, the trend toward looser credit offers more financing options, especially in used and non-captive new segments, while stable approval rates and lower down payments may improve affordability. Lenders face a balancing act between extending credit to capture market share and managing risk amid longer terms and higher negative equity.
The September CAI underscores a return to easing auto credit conditions after August’s pause, driven by recent rate cuts and ongoing market demand, while signaling continued attention to subprime loan performance and evolving economic conditions.
