April 14, 2024
Why getting a car loan is becoming more complicated

Why getting a car loan is becoming more complicated

Amid a banking crisis, getting a car loan is growing more complex.

America’s lenders approved more auto loans in March, and the share of subprime loans for those with troubled credit increased.

But the story isn’t as simple as “credit access is loosening.” Lenders insisted on shorter loan terms – removing the option of stretching out a loan to get a lower monthly payment for many buyers.

The numbers come from the Dealertrack Credit Availability Index, a product of Kelley Blue Book parent company Cox Automotive. The index showed loans were easier to get in March compared with February but harder to get than a year ago.

The average loan rate increased by 43 basis points, even though the 5-year U.S. Treasury rate decreased by 12. The average new car price is falling, but Americans must pay a higher rate to get into it.

Also see: U.S. car sales got help from an unexpected corner of the market

Banks loosened lending standards, while credit unions and auto-focused finance companies tightened theirs.

No type of lender dominates the market, so when economic and financial circumstances change, differing strategies and perspectives can lead to some lenders pulling back. In contrast, other lenders see opportunities to grow.

And while new car loans were slightly easier to find, used car loans grew harder. Used car prices have been falling, but that doesn’t help all buyers if credit is harder to find.

See: An average new car will cost you more than $700 a month. Can dealership incentives help with affordability?

According to the Conference Board Consumer Confidence Index, more Americans plan to purchase a new vehicle in the next six months than last month.

This story originally ran on KBB.com

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