For much of 2024, getting a car loan has been challenging. Loan conditions for consumers got worse in April, May, June, July, and August. Some relief is finally in sight.
The Dealertrack Credit Availability Index tracks how difficult it is to qualify for all types of car loans. It increased by 0.4% in September – a minor adjustment, but one that moved in favor of car shoppers. Kelley Blue Book parent company Cox Automotive publishes the index.
Lower Rates, Longer Terms
The average loan rate fell by 15 basis points in September, likely the first sign of easing after the Federal Reserve lowered its benchmark interest rate by 50 basis points mid-month. Cox Automotive economists tell us the full Fed rate cut may not reach borrowers until late in 2024.
Lenders granted more subprime loans and allowed longer loan terms, a move that decreased monthly payments for borrowers. Lenders were more likely to agree to fold negative equity into a loan, allowing more borrowers to trade in a car they still owed money on.
Credit unions and banks showed the most significant easing, while auto-focused finance companies loosened their standards the least. Yet their credit availability is still tighter than pre-pandemic levels.
Election Season May Still Slow Sales
The news is good for car dealers, though many still worry a tense election season will keep would-be car shoppers at home. Some brands have reasonable inventory levels, but others are drastically overstocked with cars.
That condition is helping to drive down the price of the average new car.
The Conference Board Consumer Confidence Index declined 6.5% in September, when an increase had been expected, but August’s index was revised higher. Consumers’ views of the present and of the future declined. Consumer confidence was down 5.4% year over year. Plans to purchase a vehicle in the next six months increased slightly compared to August but were down slightly year over year.