Auto lenders approved more loans in April than in March despite growing economic uncertainty and the arrival of new tariffs. But they were less likely to extend loans to those with lower credit scores.
The Dealertrack Credit Availability Index tracks how difficult it is to qualify for all types of car loans. Kelley Blue Book’s parent company, Cox Automotive, publishes the index. It declined slightly in April, reflecting a credit market moving against borrowers after improving in March. But the news wasn’t all bad.
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The approval rate for auto loans increased by 20 basis points (BPs) in April, indicating that more consumers were able to secure auto loans.
But the share of subprime loans (for borrowers with credit scores of 620 or lower) fell by 280 points — a remarkable one-month drop showing that lenders are nervous about future economic prospects for those borrowers.
The share of loans with terms longer than 72 months grew. Longer loans lower monthly payments but keep borrowers in debt longer.
The negative equity share, representing the proportion of borrowers who owe more on their loans than the value of their vehicles, increased by 10 BPs in April. This rise is an important indicator of financial stress among borrowers. Higher negative equity shares can lead to increased default rates, as borrowers may struggle to keep up with payments on loans that exceed the value of their assets.
