Access to Auto Credit Improves in November

In November 2024, the Dealertrack Credit Availability Index revealed a notable improvement in auto credit access across all channels and lender types. The All-Loans Index reached 95.4, marking a 1.0% increase from October and a 0.8% rise year over year. This is the highest level of auto credit access since October 2023.

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Dealertrack Credit Availability Index¹

Auto loan access improved in November and was up year over year

All Auto Loans Index (Jan2019=100)

Key Drivers of Credit Access

1. Approval Rates: The approval rate increased by 60 basis points (BPs) in November, a key factor in driving improved credit access. The increase in approval rates and the narrowing of yield spreads mean that more consumers are getting approved for loans – and at better rates. This upward trend offsets some restrictive measures observed in other credit factors.
2. Yield Spreads: The 5-year U.S. Treasury increased by 32 BPs in November, leading to a smaller yield spread. Yield spreads narrowed by 60 BPs, making auto loan rates more favorable compared to bond yields. The average auto loan rate dropped by 28 BPs from October. Notably, auto loan rates have decreased by 152 BPs since March. The narrowing yield spreads and the drop in average loan rates make borrowing conditions more favorable for consumers, leading to lower monthly payments and decreased overall loan costs.
3. Subprime Loan Share: The subprime share decreased by 40 BPs in November, although it increased slightly year over year. While a smaller presence of high-risk loans can tighten access for some borrowers, the impact was balanced by more favorable dynamics elsewhere.
4. Loan Term Length: The share of loans with terms greater than 72 months fell by 80 BPs, continuing a three-month trend of decreasing long-term loans. While facing shorter loan terms could mean higher monthly payments, it also means consumers can pay off the loan faster and potentially save on interest over the life of the loan.
5. Negative Equity: Loans with negative equity decreased sharply by 140 BPs in November but remained up year over year. While fewer negative equity loans can signify healthier financial conditions overall, it may narrow access for some borrowers.
6. Down Payment Percentage: The down payment percentage increased by 40 BPs compared to last month, marking the first increase since February, and remains up slightly compared to November 2023. Higher down payments can challenge consumers but can also lead to lower monthly payments and less interest over time.

Channel and Lender Trends

• Channels: Credit access improved across all sales channels in November, with new-vehicle loans experiencing the most significant loosening. New vehicle loans loosened the most, while credit availability for used loans saw the least change.
• Lender Types: All lender types saw increased credit availability. Banks showed the most significant loosening, while auto-focused finance companies loosened the least.

Year-Over-Year Comparison

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For the first time in six months, credit access in November was looser than a year ago. This improvement was observed across all channels and lender types. Credit access loosened the most for new-vehicle sales and the least for used sales. Among lender types, credit unions showed the most significant loosening over the past year, while banks loosened the least.

Implications

The November Dealertrack Credit Availability Index illustrates improving credit access for auto loans. Consumers benefited from higher approval rates and more favorable loan rates, which played critical roles in pushing the index upward. Meanwhile, the persistence of certain tightening factors – like shorter loan terms and higher down payments – was not significant enough to reverse the loosening trend.

For consumers, this means better borrowing conditions and easier access to auto financing, particularly when purchasing new vehicles. Lenders are also navigating a more supportive environment as credit demand intersects with loosening policies across all channels.

The Dealertrack Credit Availability Index tracks six factors that affect auto credit access: loan approval rates, subprime share, yield spreads, loan term length, negative equity and down payments. Reported monthly, the index indicates whether access to auto credit is improving or declining. This typically means that it is cheaper and easier for consumers to obtain a loan or more expensive and harder. The index is be published around the 10^th of each month.

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¹In November 2023, the data behind the Dealertrack Auto Credit Availability Index was reset by our data sciences team as part of a migration to a new data management system. All points in the data set were reestablished, with January 2019 in the index set at 100 (as it had been previously). The All-Loans Index plot used in this post utilizes the new data set. The absolute numbers have shifted, but the trends and narrative have not. For more information, contact the Cox Automotive team.