Auto loan approval rates increased in April but remain behind last fall’s rate. According to new data from Cox Automotive’s Dealertrack, April ended with a 71% approval rate.
What we know: April was the second straight month for approval rates to increase after reaching a low of 70.9% in February. Approval rates remain a few percentage points below the September rate of 74.4%.
Cox Automotive Chief Economist Jeremy Robb explained to CDG that though the approval rates are down from last year, “lenders have been a little bit more willing to lend over the past quarter.”
Changing marketplace: Lenders are navigating a changing market, with changing risk tiers of borrowers and also inflationary pressures.
The percentage of subprime applicants has increased in the past few months.
The largest share of subprime borrowers since March 2020 was in March of this year at 19.5%.
The share fell to 17.4% in April, but remains several percentage points above the 13.6% July 2025.
“We’ve seen pickups in the subprime share. There’s definitely a higher subprime share for both new and used relative to last year,” Robb said. “Part of that stems from the unwind from some of the things that happened during the pandemic, when [the government] sent people free money, and that ended up making a lot of people’s credit scores rise. Over time, those have been coming back down to where they used to be.”
Debt-to-income ratios are also becoming more complicated, as now consumers are faced with increasing inflation that is once again outpacing wage gains.
The newest Bureau of Labor Statistics data shows income is up 3.6% but lagging behind the annual inflation of 3.8%.
With fuel prices spiking to above $4.50 per gallon, Robb points out that personal consumption expenditures are up 5.7%, well above the wage increases by the highest margin since October 2022.
“The inflation data we got this week shows that inflation is running hotter than income growth is running any way you measure it,” Robb said. “And the producer price inflation we saw this morning also is more worrisome because it basically tells you that consumer prices should be rising for at least the next several months.”
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No improvement expected: The overall impact of the increased inflation and underwriting could be determined by the impact on interest rates, Robb indicated.
The Federal Reserve held interest rates at its target rate of between 3.5% and 3.75% last month. Auto rates for new vehicles ended April at 9.7% and 14.36% for used vehicles, according to Dealertack.
“I think it’s going to end up tightening a little,” Robb said. “Benchmark interest rates are rising right now, and the 10-year treasury is moving higher, and that’s all because of inflation. As inflation goes higher, the market has to price in interest rates going higher, and borrowing costs for lenders go higher, and they need to pass those along to consumers. That cuts out people who would be eligible for getting a loan at a certain rate.”
Also worth noting: Dealertrack did note the share of loans at terms of 72 months or longer hit an all-time high of 29.7% last month. The share of borrowers bringing negative equity into a loan dropped to 58.5% in April, ending a three-month streak of record highs. It is still up 5% YOY.
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