Auto Credit Availability Worsens After Months of Improvement

Qualifying for a car loan in November was more challenging than in October. Credit grew more restrictive after three months of improving conditions for borrowers.

The Dealertrack Credit Availability Index tracks how difficult it is to qualify for all types of car loans. Economists from Kelley Blue Book parent company Cox Automotive calculate the index every month.

Loan standards hit historically tight levels in May but had been easing through the fall. That appears to be over, as approval rates hit their lowest level this year in November.

Related: Average New Car Price Down Year-Over-Year For Third Straight Month

Credit availability tightened at nearly all types of lenders during the month, including banks and credit unions. Captive lenders controlled by automakers — the loans dealers offer — loosened slightly to boost new car sales. But smart buyers usually bring their financing before testing to see if the dealership’s terms beat it. That’s growing harder to do.

Lenders asked for higher down payments in November and offered shorter loan terms — a move that raises monthly payments, though longer loan terms can leave borrowers paying more in the long run.

The share of loans given to subprime borrowers — those with credit scores of 620 or lower — decreased to 12.1% from 12.2% in October. Subprime and deep subprime loans were nearly a quarter of the market as recently as 2018.

Despite credit tightening, consumer confidence is starting to rise. The Conference Board Consumer Confidence Index increased by 2.9% during the month, and plans to purchase a new vehicle are up year-over-year. The consumer’s view of buying conditions for vehicles declined slightly as views of prices were less negative, but views of interest rates deteriorated.

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