Americans had a harder time borrowing money to buy a new car in June, as every type of lender tightened their standards.
The Dealertrack Auto Credit Index tracks how difficult it is to qualify for all types of car loans. It decreased in June, moving against borrowers. Kelley Blue Book parent company Cox Automotive publishes the index.
Obtaining credit is the hardest part of buying a new car this year. The price of the average new car has fallen through much of the year. But, while car dealers can lower prices, they can’t make it easier to borrow money.
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Approval rates declined in June, and lenders were less willing to take on negative equity (that is, fold the remaining balance of an old car loan into a new one).
Only one factor improved for borrowers – lenders accepted lower down payments – but it wasn’t enough to offset the problems. Credit unions tightened their standards more than banks.
The share of subprime loans – loans for those with credit scores under 600 – remained steady month-to-month. But it is historically low – a recent study found that 84% of new car borrowers have prime or above-prime credit. Subprime borrowers routinely accounted for nearly a quarter of the market in 2018. Today, they make up less than 6%.
The Conference Board Consumer Confidence Index declined 0.9% in June, as views of the future declined more than views of the present improved. Consumer confidence was down 8.8% year over year. Plans to purchase a vehicle in the next six months declined compared to May but was higher than June last year.
