Auto Lenders, Consumers on a Tightrope
April borrowing data shows that more consumers are bending over backward to buy vehicles, though subprime lending cooled off for the month.
Captive lenders and credit unions cut auto credit availability in April.
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Risk factors in auto lending continued to rear their heads in April as consumers squeezed themselves into new rides and lenders sought to balance conditions.
The share of extra-long loan terms hit a record high, Cox Automotive said in its monthly Dealertrack Credit Availability Index report. And though the subprime share retreated from a six-year peak in March, it was still up sharply from a year earlier.
Similarly, the number of borrowers with negative equity, though their share fell 70 basis points from March to about 59%, was still up by a dramatic 540 basis points year-over-year.
Captive lenders and credit unions cut auto credit availability for the month, captives by about half a percentage point.
Overall subprime lending fell 210 basis points from March to 17%, though that was still up 370 basis points from a year earlier.
The subprime tightening was offset by the nearly 100 basis-point rise in 72-month-plus loan terms to about 30%, in addition to narrowing yield spreads and increased approval rates, Cox reported. The latter climbed 60 basis points to 71%, though that was down 120 basis points year-over-year.
The long loan terms and negative equity point to continued consumer affordability pressures that lenders and auto dealers must juggle.
Cox’s credit availability index was essentially flat month-over-month at 102, its highest reading since June 2022.
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