Auto loan approval ratings hit highest since 2015

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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 Jonathan Smoke, economist at Cox Automotive.
  • “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.

  • It’s a sharp 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 arrangements are for people with a credit score above 760, which is higher than before, according to Rosenthal.

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