Cox Automotive: Auto Credit Availability Improved in April for 11th Straight Month

COX AUTOMOTIVE – Access to auto credit expanded again in April, according to the Dealertrack Credit Availability Index for all types of auto loans. The All Loans Index increased 1.7% to 106.3 in April, reflecting that auto credit was easier to get in the month compared to March. Access was looser by 8.1% year over year, and compared to February 2020, access was looser by 7.2%. The index in April was the highest recorded in the data series going back to January 2015.

The majority of inputs into credit availability moved to benefit consumers in April. The average yield spread on auto loans narrowed to provide the biggest boost as bond yields moved higher than the rates consumers were seeing on auto loans. The average auto loan rate declined by 14 basis points (BPs) in April compared to March, while the 5-year U.S. Treasury increased by 67 BPs, resulting in lower observed yield spreads. 

All loan types saw credit easing in April, with new loans from non-captives easing the most. All loan types were easier to get on a year-over-year basis, with certified pre-owned (CPO) loans loosened the most. 

Credit access also improved across most lender types in April, with banks having loosened the most. All lenders had looser standards on a year-over-year basis, with auto-focused financed companies having loosened the most. 

Each Dealertrack Credit Availability 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 provide a view of how credit access shifts over time. Across all auto lending in April, the approval rate increased, yield spreads narrowed, terms lengthened, and negative equity grew, and the moves in those factors made credit more accessible. However, the subprime share declined and down payments grew, so those factors moved against accessibility. 

Measures of consumer sentiment mixed in April. According to the Conference Board, Consumer Confidence declined 0.3% in April, erasing some of March’s 1.8% gain. The decline left confidence down 8.7% year over year. The underlying measures of present situation and future expectations moved in opposite directions as present situation declined, but future expectations improved. Plans to purchase a vehicle in the next six months increased to the highest level in three months but were slightly lower than a year ago. Plans to purchase a home improved slightly from March but were down substantially year over year. The sentiment index from the University of Michigan increased 9.8% in April as current conditions and expectations both improved, with expectations jumping the most. The Michigan reading had reached an 11-year low in March. The Morning Consult daily index declined 1.3% in April, but it recovered some of the losses it had seen in the first half of the month. The index from Morning Consult hit its lowest point for the pandemic on March 14, which was when gas prices initially peaked. 

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