Fewer people are considering buying a car; Loans are getting harder to find

It’s getting harder and harder to buy a car, and fewer and fewer Americans are considering it.

The Dealertrack Credit Availability Index tracks auto loan application data to indicate whether access to auto credit is improving or deteriorating. It fell 1.8% in July.

Auto loans are still historically easy to get – the index remains 5.3% looser than a year ago. But July marks the third consecutive month of tightening standards.

The trend could be a sign that the Federal Reserve’s repeated moves to raise interest rates are having the intended effect, slowing Americans’ big buying. Interest rate changes, however, may have primarily affected the housing market.

A low supply of used cars is more of a drag on car sales than rising interest rates. The average price of new cars reached a record high in July, mainly due to the continued shortage of electronic chips. This is largely beyond the banks’ control.

Approval rates fell last month and the share of loans granted to subprime borrowers declined. Credit unions tightened their lending standards the most, while finance companies focused on auto loans tightened the least. But it has become more difficult to qualify for a loan everywhere.

Used car loans from independent dealerships remain the easiest type to obtain, but it remains the segment of the auto loan industry most subject to predatory lending standards.

However, tighter lending standards may not be a problem for many Americans. The Conference Board’s consumer confidence index fell 2.7% in July. Plans to buy a vehicle in the next six months have fallen to their lowest level so far this year and are down significantly year-on-year.

About Galen A. Williams

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