Car loans were harder to get in December than at any time since the fall of 2021.
The Dealertrack Credit Availability Index, which measures how difficult it is for the average consumer to get a car loan, showed the tightest credit market since September 2021. The index is a product of Kelley Blue Book’s parent company Cox Automotive.
The approval rate ticked up slightly compared to November — lenders approved 0.5% more loans last month. But it remains 3.1% lower than a year ago.
In December, lenders asked for higher down payments and granted loans at higher interest rates. Loan terms shortened, preventing borrowers from lowering their payments by stretching them over a more extended period.
The share of subprime loans declined, meaning buyers with lower credit scores had a more challenging time qualifying for a loan.
On a year-over-year basis, loans for Certified Pre-Owned (CPO) cars grew slightly easier to obtain. But loan criteria for new and other used cars grew more stringent.
The changes came after a year in which the Federal Reserve increased interest rates five times, and new car prices continued to increase. The average new car sold for a record $48,681 in November — the most recent month for which data are available.
Despite the news, the Conference Board Consumer Confidence Index increased 6.8% in December, as both present situation and future expectations measures improved. Plans to purchase a vehicle in the next six months improved slightly and remained up year over year.
