Auto Credit Availability Loosened Modestly in February

Access to auto credit loosened modestly in February, according to the Dealertrack Credit Availability Index for all types of auto loans. The All-Loans Index increased 0.9% to 98.1 in February, reflecting that auto credit was easier to get in the month compared to January. Even with the increase in February, access was tighter by 4.4% year over year, and compared to February 2020, access was tighter by 1.0%.

Dealertrack Credit Availability Index

Auto loan access increased modestly in February but remained down year over year

All Auto Loans Index (Jan2019=100)

Credit Availability Factors Mixed in February

Movement in credit availability factors was mixed in February. Yield spreads widened, down payments increased, and average terms shortened, and those moves limited credit access for consumers. However, the approval rate increased, the subprime share increased, and the share of loans with negative equity increased, and those moves expanded credit access for consumers.

The average yield spread on auto loans widened, so rates consumers saw on auto loans were less attractive in February relative to bond yields, and both moved higher. The average auto loan rate increased by 37 basis points (BPs) in February compared to January, while the 5-year U.S. Treasury increased by 29 BPs, resulting in a wider average observed yield spread.

The approval rate increased by 0.2 percentage points in February but was down 2.1 percentage points year over year. The subprime share increased to 11.9% from 10.7% in January but was down 0.8 percentage points year over year. The average down payment percentage increased by 0.2 percentage points and was up 2.2 percentage points year over year. The share of loans with greater than 72-month terms declined 0.8 percentage points and was down 0.8 percentage points year over year.

Access to Most Loan Types Loosened

All loan types saw loosening in February, with used loans loosening the least and new loans loosening the most. On a year-over-year basis, all channels were tighter, with new loans having seen the most tightening.

Credit access loosened across most lender types in February, with only auto-focused finance companies tightening and banks loosening the most. On a year-over-year basis, credit access was tighter across most lender types except auto-focused finance companies. Over the last year, credit unions have tightened the most.

Each Dealertrack Auto Credit Index tracks shifts in loan approval rates, subprime share, yield spreads and loan details, including term length, negative equity, and down payments. The index is baselined to January 2019 to show how credit access shifts over time.

Measures of Consumer Confidence Mixed in February

The Conference Board Consumer Confidence Index® declined 2.9% in February, as views of the present situation improved, but future expectations fell by 8.3%. Plans to purchase a vehicle in the next six months fell to the lowest level since November 2021. The confidence index did not decline as much during the pandemic as the sentiment index from the University of Michigan, but that series has improved every month this year. The Michigan index increased 3.2% in February and was up 6.7% year over year. Consumers’ views of vehicle buying conditions declined modestly in February but remained much better than a year ago. The daily index of consumer sentiment from Morning Consult measured improving sentiment in February following a slight decline in January. That index increased 3.2% in February as the price of gasoline declined. According to AAA, the national average price for unleaded gas fell 4.1% in February to $3.36 per gallon on Feb. 28, down 7% year over year.

The Dealertrack Credit Availability Index is a monthly index based on Dealertrack credit application data and will indicate whether access to auto loan credit is improving or worsening. The index will be published around the 10^th of each month.