Credit Availability and Financing Trends
Credit Availability and Financing Trends
Auto Market Update
Economic and Automotive Market Update
- The Middle East conflict has quickly become the primary macroeconomic risk for the auto industry this spring.
- Rising energy prices are reintroducing inflation pressure and increasing the likelihood that interest rates remain elevated through the core selling season.
- Near-term demand is being supported by improved credit access and strong tax refunds.
- However, weakening consumer sentiment and geopolitical uncertainty are creating a more fragile outlook for large discretionary purchases like vehicles
Consumer and Demand Environment
- Credit availability has reached its highest level since mid-2022
- Tax refunds are running 10.6 percent above last year, with average refunds nearly 3700 dollars
- These factors are helping sustain both new and used vehicle demand in the near term
- Consumer sentiment is deteriorating
- The University of Michigan index fell to 55.5, the lowest reading of the year
- Morning Consult sentiment is down 6.6 percent year over year
- Rising gas prices and geopolitical uncertainty are weighing on confidence
Implication: Consumers still have liquidity, but confidence is weakening. This creates a narrower path to closing deals, especially on higher priced units
Credit Availability and Financing Trends
- Dealertrack Credit Availability Index rose to 101.3
- Up 1.5 percent month over month and nearly 6 percent year over year
- Subprime share increased to 17.5 percent, the highest level since March 2025
- Loans over 72 months reached 29.3 percent
- Negative equity hit a record 58 percent
Implication: Lenders are actively stretching to support affordability. This is helping maintain volume but increasing long term risk in loan structures.
Inflation, Income, and Spending
- CPI increased 0.3 percent in February and remained at 2.4 percent year over year
- Food and energy drove the increase, with gasoline up and utility gas jumping 3.1 percent
- Gas prices have since surged to 3.63, up more than 21 percent in March alone
- Shelter inflation continues to ease but still represents the largest component of CPI
- Personal income rose 4.4 percent year over year
- Consumer spending rose 5.3 percent, outpacing income growth
Implication: Households are losing purchasing power in real terms, which will pressure future discretionary spending.
Wholesale Market Signals
- Seasonal spring lift is underway
- Sales conversion rates are strong
- Pricing trends are firming
Implication: Dealers are still anticipating solid retail demand in the near term, supported by tax refunds and improved credit access.
Strategic Takeaways for Dealers
- Short term demand remains intact w/ tax refunds and expanded credit are supporting sales activity today
- Affordability remains the central challenge w/ longer loan terms and rising negative equity indicate continued pressure on buyers
- Consumer confidence is the key risk w/ weakening sentiment combined with rising fuel costs could slow demand quickly
- Rates may stay higher for longer, w. energy-driven inflation risk reduces the likelihood of near-term rate relief
- Wholesale strength suggests near-term stability as dealers are still positioned for a solid spring, but conditions could shift quickly
Bottom Line for the Market
The auto market is being supported by liquidity and credit expansion in the near term, but the foundation is becoming more fragile. Geopolitical risk, rising fuel costs, and stretched consumer finances are increasing the probability of a more challenging environment as the year progresses.
