Credit access widened for automotive consumers in August, but it came at a price.

By Cox Automotive’s credit availability measures, access reached its highest point in nearly 11 years as subprime and negative equity shares rose for the first time in five months and extra-long loan terms hit a record high.

The company’s Dealertrack Credit Availability Index rose nearly half a percentage point from July to 105, up about 8% year-over-year.

While subprime loan share increased to nearly 17%, fewer loans originated in the category as the overall lending rate fell faster in the month, Cox said.

Negative equity share, meanwhile, rose to more than 57%, up 60 basis points month-over-month and by nearly 400 basis points from a year earlier.

Credit access was up for a fourth straight month. Captive lenders led the way in loosening conditions for borrowers, up 1%, Cox reported. Banks and finance companies were up by smaller percentages.

Availability increased the most – 1% – for certified preowned vehicles, whose loan access hit its widest point since November 2022, Cox said.

Balancing the Risk

Yield spread increased ever so slightly at four basis points as the only balance to the loosened loan structures, making up for about a quarter of them.

“Lenders are taking on more risk, but they are being compensated for that risk as the contract rate rose faster than the underlying Treasury yield, widening the spread … ,” wrote Cox Manager of Economic and Industry Insights Scott Vanner.

About 74% of auto loan applications won approval in the month, up 20 basis points from July and the highest point in a year, though the percentage increase was well below those seen in May and June, according to Cox.

Down payment percentage was the only metric to hold steady in August at 13%.