- After a summer of improving credit conditions, lenders made it harder to get a new car loan in August
- Credit is still broadly accessible, but a loosening trend may be shifting
Americans had a modestly harder time obtaining new car loans in August than in July. Borrowing standards tightened only slightly, but the news may mark the end of a summer of improving credit conditions.
Kelley Blue Book parent company Cox Automotive also owns Dealertrack, a company that provides much of the software car dealers use to smooth their business operations. Its Dealertrack Credit Availability Index maps the loan market. The index edged down to 97.8 from 98.0 last month, suggesting a cautious shift in lenders’ thinking.
Credit access remains significantly looser than a year ago, with the index up more than 5 points from August 2024.
Related: Is Now the Time to Buy, Sell, or Trade-In a Car?
The approval rate inched up during the month, meaning lenders issued more loans than the previous month. However, the average down payment rose by one basis point, and lenders were less likely to accept negative equity.
The share of loans with terms over 72 months decreased. Longer loan terms can decrease monthly payments, but keep consumers in debt longer. Restricting them is a sign of more conservative lender decisions.
Credit unions loosened their lending standards slightly, while banks and the auto-specific finance companies used by car dealers tightened theirs.
The news comes as controversy over the Federal Reserve board grows. The board controls the interest rate for overnight loans between banks, which lenders use to calculate their own rates. It must decide whether to cut rates next week amid tumult as President Trump has attempted to fire a board member and a court has ruled that he lacks that authority.
