Credit availability up 3%, ATPs inch up

Credit availability and affordability improved year over year, despite average transaction prices inching up as tax refund season arrives and lenders loosen credit. The Dealertrack Credit Availability Index rose to 95.9 in February, up 3% year over year , marking the highest level of auto credit access since December 2022, according to Cox Automotive . Dealertrack Credit Availability Index [caption id="attachment_58349858" align="aligncenter" width="1024"] (Courtesy/Cox Auto)[/caption] Lenders are willing to dip a bit deeper into their credit boxes as interest rates are improving, though they are not where they were three years ago, Eric Lane , owner of the Gerry Lane Enterprises dealership group in Baton Rouge, La., told Auto Finance News . “Lenders are buying a little deeper again. For a while, they had tightened up,” he said. “Last year, they tightened up a lot because inflation was so high and people were delinquent on their on their monthly payments. But they're beginning to get more realistic now.” “Lenders are buying a little deeper again. For a while, they had tightened up." -- Eric Lane, Gerry Lane Enterprises In fact, the net percentage of domestic banks tightening standards for auto loans was forecasted to decline further in January and hold steady into the coming months, according to an Auto Finance News forecast based on Federal Reserve data. This indicates that standards are largely steady or looser for auto loans. Credit demand, availability and forecasts [caption id="attachment_58349860" align="aligncenter" width="1212"] (Chart/Big Wheels | Source/Federal Reserve)[/caption] Affordability improves New-vehicle affordability also improved in February, with the Moody’s Analytics Vehicle Affordability Index measuring weeks of income needed to purchase a new light vehicle at 37.2, according to a Cox Auto report published March 14. By comparison, the index sat at 37.7 weeks in January and 39 weeks in February 2024. The average monthly payment dipped by 1.3% year over year and 1.1% month over month to $748, while auto loan interest rates averaged 10.16% in February. Moody’s Analytics Vehicle Affordability Index February 2025 [caption id="attachment_58349859" align="aligncenter" width="1024"] (Courtesy/Cox Auto)[/caption] Subprime share rises A 150 basis points (bps) YoY increase in subprime share contributed to better credit access in February, according to Cox. Subprime share of auto loans rose to 14.3% in February, Jonathan Gregory , senior manager of economic and industry insights at Cox, told AFN. However, while tax refund season has contributed to the increase in subprime share of auto financing, refunds pressure credit access, he said. “We definitely see this time of year subprime borrowers get their tax refunds. They turn that into ways to either pay down their debt or buy a new car,” Gregory said. “The irony is those things that are helping the individual are things that hurt auto credit.” Subprime borrowers may, for example, put tax refunds to use in putting more cash down for a vehicle and get shorter loan terms, he said. Those factors move against the availability index as higher down payments are typically an indicator of less access to credit. Approvals, yields increase As credit access improved in February, approvals and yields increased, according to Cox. Approvals increased 10 bps industrywide in February, according to Cox. The five-year U.S. Treasury also declined by 14 bps and yield spreads widened by 50 bps, making for more favorable auto loan rates compared with bond yields . Still, despite credit access improving, dealers listed interest rates and the economy as the two biggest factors holding back business, according to Cox Auto’s Q1 2025 Cox Automotive Dealer Sentiment Index released March 12. However, fewer respondents indicated those factors as top concerns in the latest survey compared with a year prior. The percentage of respondents who ranked interest rates as the leading challenge for business sat at 52% in Q1 2025 compared with 62% in Q1 2024. Respondents who named the economy as the leading factor made up 45% from 55% a year prior. Some dealers have also noted an increase in credit availability. For Carriage House Mercedes-Benz of New London in Connecticut, access to credit has improved this year, President and Owner Jeff Aiosa told AFN . Aiosa attributed the increase to stability in the market, which is especially important for luxury buyers, he said. “Our customers are not averse to risk, they're averse to uncertainty,” Aiosa said. ATPs inch up YoY Meanwhile, new-vehicle average transaction prices (ATPs) increased YoY in February. New-vehicle ATPs in February rose 1% YoY to $48,039, according to Kelley Blue Book . For new EVs, ATPs rose 3.7% to $55,273. Still, incentives were strong in the month, largely easing the slight price increases. “We are back in an incentive environment that we were in pre-COVID,” Aiosa said. Incentives rose 18.6% YoY in February, according to KBB, with the average incentive package equating to 7.1% of ATP, or roughly $3,392. “We see incentives that we haven't seen in years,” Gerry Lane Enterprises’ Lane said. -- Additional reporting by Amanda Harris Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Early-bird registration is available here .

Credit availability up 3%, ATPs inch up

Dealertrack Credit Availability Index up 3% YoY

States could pick up where CFPB left off

Nvidia aims to expand AI reign with robots, desktop systems

Related Posts

‘Synthetic fraud is rampant’: Agentic AI, social media empowers auto scams

Retail used-EVs days’ supply falls below overall market at 31.2 days

Credit unions say inflation is top concern amid portfolio growth

Used EV values rise 11.9% YoY in May as new EV market share drops

Nvidia aims to expand AI reign with robots, desktop systems

Stay Informed with Our Newsletters

The Roadmap Podcast

SPONSORED

Why credit unions give dealers an edge in today’s auto market

Driving better decision-making across auto finance operations with SAS

Auto finance’s first line of defense: Raising the standard in integrated software partnerships and data strategy

Retrieve your password