While new vehicle sales have been strong this summer, financing a new car, truck or SUV isn’t getting easier. Banks and credit unions continue to tighten restrictions while auto finance companies have been picking up the slack by easing theirs.
Banks and credit unions tightened loan restrictions in August, but finance companies actually loosened up.
Cox Automotive’s Dealertrack Credit Availability Index was down in August. The All-Loans Index was 92.5 in August, down 0.5% from the July reading and down 1.7% year over year. Cox Automotive’s Dealertrack Credit Availability Index was down in August.
The All-Loans Index was 92.5 in August, down 0.5% from the July reading and down 1.7% year over year. The fall is a result of shorter loan terms and increased yield spreads, Cox analysts noted.
Compared to year-ago, access to credit for new and used vehicles is more restricted. For those looking to buy a certified pre-owned vehicle, the conditions tightened up the most.
Small upside
With inventory up, dealers are more willing to negotiate and manufacturers are introducing new incentives.
While things are tougher on a year-over-year basis, there is some good news in the short term.
Banks and credit unions have been clamping down on loans to less-than-ideal borrowers, but automotive finance companies have actually loosened up a bit compared to July.
Although lenders are cutting back on the availability of loans with terms longer than 72 months, subprime loans increased for the first time since March.
Additionally, the down payment percentage was flat for a third month after slowly trickling down since the start of the year and is flat compared to a year ago.
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Real numbers
Amidst fluctuating bond yields, auto loan rates have been relatively stable in August. The average rate for a used car loan stood at 13.92%, while a new-car loan was at 9.58%. The proportion of rates below 3% rose to 12.1% in August, with the 0% APR demonstrating a higher rise year over year and a slight increase month over month compared to July.
The average transaction price for a new vehicle fell in August.
New-vehicle supply has tightened over the past month, representing a 5-day increase year over year but a decrease compared to the previous month. Used-vehicle supply has similarly tightened, showing a noticeable decrease against last year.
In the last week of August, average wholesale prices for model year 2021 cars rose by 0.3%, whereas retail prices climbed by 0.1%, marking the first weekly increase in 2024.
Sales still grew
Despite loans getting more restrictive terms, buyers came out in droves in August as sales rose 7.6% compared to same period last year. They were up 11.2% on a monthly basis, which was the highest volume since March.
Although financing was tough last month, buyers paid less for their new vehicles. The average transaction price of a new vehicle fell slightly (0.6%) from July to $47,870. This was due in some measure to the increased incentive spend by automakers, which offered up $3,447 to move each vehicle off a dealer lot — up 46% year over year.
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