Accessing a car loan became easier in August, marking the third consecutive month of relaxed lending standards. While credit availability is slowly recovering from the exceptionally tough conditions seen earlier this year, it remains historically difficult to qualify for a car loan.
The Dealertrack Credit Availability Index tracks the difficulty in qualifying for various types of car loans. In August, it showed that obtaining auto credit was easier than at any other time since 2023.
Owned by Kelley Blue Book’s parent company, Cox Automotive, Dealertrack plays a significant role in assessing credit availability.
Insights and Trends
In May, lending standards reached record tightness. Furthermore, a recent Federal Reserve study revealed that more car loan applicants have been rejected this year than at any other point since data collection began.
However, there has been a gradual relaxation of these standards since then. Last month, all types of lenders loosened credit availability, with subprime loans (for borrowers with credit scores under 620) accounting for 11% of the market. In comparison, they represented nearly a quarter of the market in 2018 but had fallen to just 8% earlier this year.
While some aspects remained less favorable for borrowers, such as a slight decrease in approval rates, lenders are now requesting lower down payments and offering longer loan terms. The latter can result in lower monthly payments for borrowers but also means being in debt for an extended period.
Consumer Confidence and Future Prospects
The Conference Board Consumer Confidence Index experienced a 6.9% decline in August due to a drop in both present situation and future expectations. Despite this decline, consumer confidence remains up by 2.4% year over year. While plans to purchase a vehicle in the next six months decreased modestly, they remained higher than the previous year.
This information is based on the KBB car review methodology.
This story was originally published on KBB.com.