Auto loan availability is the strongest its been in nearly 2 years

Auto credit access held steady in January, but the details paint a mixed picture. 

Driving the news: The Dealertrack Credit Availability Index showed overall credit availability remained flat from December but improved 3% year over year—marking the highest level since March 2023 after years of tightening. 

For context: Lending standards naturally tighten in uncertain economic conditions (i.e., the last couple of years), but the bigger question is—have auto lenders been tightening their standards for too long? 

• A study from MIT Sloan’s Jonathan Parker and co-authors found that after financial shocks, lenders tend to overcorrect—performing excessive due diligence that raises costs and shrinks the pool of eligible borrowers.

• And in January, certain factors moved against consumers, like declining approval rates and widening yield spreads. (When spreads widen, the market demands a higher premium for lower-tier credit quality.)

• On top of that—the average auto loan rate rose for the first time in nearly a year, making financing more expensive and putting pressure on monthly payments. 

On the bright side: Some borrowers are still managing to find access. 

• Subprime loans made up the highest share of approvals since April 2024, opening the door for riskier applicants. 

• Longer-term loans also inched up, easing the payment burden for certain borrowers.

• And while negative equity loans surged—a potential sign of financial strain—they also expanded access to some buyers, according to Jonathan Gregory, a Senior Manager on Cox Auto’s economic and industry insights team.

Zooming in: Lender behavior is also shifting with loosening criteria for banks and captives but tightening at auto-focused finance companies and credit unions.

Bottom Line: Auto financing is more accessible than a year ago, but it’s also more expensive. Yet—if lenders remain too cautious for too long, they risk dampening demand. The challenge for lenders in 2025? Finding the right balance between risk management and keeping the market moving.

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