November 2024 saw a significant uptick in auto credit access, with the Dealertrack Credit Availability Index reaching 95.4—a 1.0% increase from October and a 0.8% rise year over year. This marks the highest level of auto credit access since October 2023, signaling positive movement across all channels and lender types in the auto financing landscape.
Several key factors contributed to the improved credit availability in November:
- Approval Rates: Approval rates increased by 60 basis points (BPs), driving more consumer approvals. This rise, coupled with narrowing yield spreads, means more consumers qualify for loans at better rates. This shift helps offset some restrictive credit measures observed in other areas.
- Yield Spreads: The 5-year U.S. Treasury yield increased by 32 BPs in November, narrowing yield spreads by 60 BPs. This made auto loan rates more favorable compared to bond yields. The average auto loan rate dropped by 28 BPs from October and has decreased by 152 BPs since March, improving consumer borrowing conditions. Lower monthly payments and reduced overall loan costs are the direct benefits of this trend.
- Subprime Loan Share: The subprime share decreased by 40 BPs in November. While subprime loans still increased slightly year over year, the overall trend points to tightening access for higher-risk borrowers, partially balanced by more favorable conditions in other areas of the credit market.
- Loan Term Length: The share of loans with terms longer than 72 months fell by 80 BPs in November, continuing a three-month trend of reducing long-term loans. While shorter loan terms may result in higher monthly payments, they can lead to faster payoffs and reduced interest over the life of the loan.
- Negative Equity: Loans with negative equity saw a 140 BPs decrease in November, signaling improved financial health for consumers overall. However, the persistent presence of negative equity loans compared to the prior year means that some borrowers may still face restricted access.
- Down Payment Percentage: The down payment percentage increased by 40 BPs compared to October, marking the first increase since February 2024. While higher down payments may challenge some consumers, they often lead to reduced monthly payments and lower interest costs over the loan’s duration.
Channel and Lender Trends
- Sales Channels: Credit access improved across all sales channels in November, with new-vehicle loans experiencing the most significant loosening and used-vehicle loans experiencing the least change.
- Lender Types: All lender types experienced increased credit availability. Banks saw the most significant loosening of credit, while auto-focused finance companies loosened credit the least.
The November 2024 Dealertrack Credit Availability Index reflects an improving consumer credit environment. Higher approval rates, lower loan rates, and more favorable credit conditions drive the loosening trend. Despite some tightening factors—such as shorter loan terms and higher down payments—the overall trend supports consumers looking for auto financing.
