Getting a car loan has not been so easy in years.
Why is this important: It comes amid a demand windfall that began at the start of the pandemic – when traveling by car became the most attractive mode of transportation.
Auto loan approval ratings are at their highest since 2015, according to Cox Automotive.
- What is happening: Auto loans are getting cheaper and longer, two factors that reduce monthly payments – something that “most consumers focus on more than anything else,” says Cox Automotive economist Jonathan Smoke.
- “Consumers have consistently seen better rates every month this year than a year ago – it really helped offset some of the vehicle price inflation,†Smoke said.
The big picture: The net percentage of banks making loans more difficult to obtain is at lowest level since 2012 – a sign that lenders are keeping loan terms flexible, or even making them more flexible.
- This is a marked reversal from last year, when it looked like the economy was on the brink of collapse.
- At the same time, the net share of banks signaling higher demand for auto loans hit a new high in the pandemic era (also the highest in nine years).
But, but, but: “Banks don’t just give loans to just anyone,†says Jesse Rosenthal, analyst at CreditSights.
- About a third of auto loan originations go to people with a credit score above 760, which is higher than before, according to Rosenthal.
