Auto loans were harder to get in July than they were in June, and that's the third month in a row auto loan approval rates have fallen. Based on auto loan approval data, car loans have been getting harder and harder to get since loan approvals peaked in April.
Loan availability tightened in July. In July, across all types of auto lenders, car loan approval rates declined, and subprime loans were even harder to get. This data comes from the Dealertrack Credit Availability Index. All these factors are points against auto loan accessibility. However, some tightening in loans may be made easier to swallow by the fact that some consumers that do qualify for lending are getting longer loan terms.
Dealertrack data shows that, in July, car loans were easier to get than other types of loans. Captive and auto-focused finance companies still gave the most auto loans compared to June, while credit unions pulled back on the number of loans they approved. Loans for new cars became more difficult to get while used car loans declined the least between June and July.
All of these factors can signal that there is an economic shift going on. This has been evident in American life based on inflation, fluctuations at the gas pump, and differences in the lending patterns to borrowers. The tightening in lending may be a signal that the Federal Reserve's interest rate hikes are working, but it's too soon to tell for sure.
What does this mean if you're looking for a car loan? If you're looking for an auto loan, the time is now, especially if the trend of tightening continues. If it does, the trend points to even fewer loans being approved as time goes on. There's no telling at the moment which way this trend will shift in the coming months.
What stands in the way of loan approval? Loan approval rates depend on your situation, and the lender you're working with, but there are some factors that can make it more difficult to get a loan such as poor credit scores, past repossessions, and a general lack of credit history.
Lately, the trend is for lenders to be more careful with who they approve for loans, so it's important to make sure you know what your situation is before you start applying for credit. Knowing where to go for your loan is also key to auto loan approval, not every lender works with all types of credit.
What can help me get approved for an auto loan? It's important that you know your options when it comes to where to go for a loan. You can try for a direct loan, or pre-approval from a bank or credit union, though this can be tough to get, especially with the current tightening.
Another option is to go directly to a dealership and apply for lending with their lenders. Some dealerships work with captive finance companies like Ford Credit, GM Financial, or Subaru Motor Finance, while others work with independent finance companies. These loans may be easier to get right now, especially if you have good credit.
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