Most economic news has been good early in 2024, but the market is still challenging for those looking for a car loan.
The Dealertrack Auto Credit Total Loan Index tracks how difficult it is to qualify for all types of car loans. It fell 1% in January, reaching its lowest level since August 2020. Kelley Blue Book’s parent company, Cox Automotive, publishes the index.
Credit was harder to find at banks, credit unions, and captive lenders at dealerships last month than it was a year ago.
Fewer loans were approved, and lenders asked for shorter loan terms (which raises the cost of monthly payments). Down payments remained steady.
The share of subprime loans — those for borrowers with credit scores under 620 — fell to 11.2% in January. It was 11.4% in December. Subprime loans were nearly a quarter of the market as recently as 2018.
The news is bad in the short term but likely to improve. This month, the Federal Reserve signaled its intent to cut loan rates in 2024. The Fed rates ripple through the loan system, so Fed cuts should mean lower rates for everyone.
The Conference Board Consumer Confidence Index increased by 6.3% in January, powered by views of the present situation jumping 9.6% and to the highest level since March 2020. Consumer confidence was up 8.3% year over year. Despite the good news, plans to purchase a vehicle in the next six months declined to the lowest level since April and were down year-over-year.
