CU Members See Auto Lending Loosen as Affordability Challenges Continue

For buyers who could find a car, credit unions and other lenders made it easier to obtain a loan in April, Cox Automotive reported Tuesday.

Cox’s Dealertrack Credit Availability Index rose 1.7% from March to reach 106.3 in April, its highest level tracked by Cox since January 2015. The index also rose 8.1% from April 2021.

The index rose for most lender types from March to April, and for all types in the 12 months ending April 30.

In April, credit union credit access was 10.3% looser than a year earlier, while the index rose 8.5% for banks, 11.1% for captives and 14.7% for finance companies.

Factors easing credit from March to April included higher approval rates, narrower yield spreads and longer terms. Factors limiting credit were a lower share to subprime borrowers and higher down payments.

“The average yield spread on auto loans narrowed to provide the biggest boost as bond yields moved higher than the rates consumers were seeing on auto loans,” according to the Cox report. “The average auto loan rate declined by 14 basis points in April compared to March, while the 5-year U.S. Treasury increased by 67 basis points, resulting in lower observed yield spreads.”

Meanwhile, the New York Fed reported Tuesday that lenders originated $176.6 billion in auto loans to U.S. households in the first quarter, down 2.2% from the fourth quarter and up 15.6% from 2021’s first quarter. The data is not seasonally adjusted, and the 2.2% drop compares with fourth-to-first-quarter drops of 5.6% in 2021, 5.2% in 2020 and 3.6% in 2019.

The Fed researchers attributed most of the 12-month increase to higher prices.

To wit, Cox’s Kelley Blue Book reported Tuesday the average new car sold for $46,526 in April, up 0.7% from March ($46,223) and up 13% from April 2020 ($41,172). Cox reported earlier that the average list price for a used car stood at $27,246 at the end of March, up 28% from a year ago, but down from $27,609 in February and down from its all-time record topping $28,000 in December.

Rebecca Rydzewski, for Cox Automotive’s research manager of economic and industry insights, said buyers continued to pay above the manufacturer’s suggested retail price for a new car or truck as inventories remained low.

“For nearly a year now, we’ve seen new vehicles transacting above suggested retail prices,” Rydzewski said. “High prices, a lack of inventory, few incentives — the market is changing, pushing many would-be buyers to the sidelines and forcing others to order from future stock and wait. We expect new-vehicle affordability will be a challenge for the foreseeable future.”