Auto Loan Trends Shift: New Opportunities and Challenges for Car Buyers - NEW BOX OFFICE TO DAY

In March and April, we see changes in approval ratings and loan conditions.

Recent data indicates that March and April presented varied outcomes for individuals seeking car loans. An analysis from the Cox Automotive index, which assesses the ease of obtaining loan approvals, revealed that the situation became somewhat more challenging for applicants in April following improvements in March. Kelley Blue Book The percentage of subprime loans approved for individuals having credit scores of 620 or lower decreased by 280 basis points (2.8%), indicating a substantial decline over just one month. Additionally, there was an increase in loans with durations exceeding 72 months. Although 96 months stands as the typical longest duration for auto loans, certain lending institutions limit their terms to a maximum of 84 months.

In April, the percentage of borrowers whose loan amounts exceeded the value of their vehicles rose by 10 basis points (0.10%). Despite this, the general acceptance rate for automobile loans climbed by 20 basis points (0.20%). This suggests that lenders now perceive subprime borrowers with credit scores at or below 620 as riskier compared to earlier periods.

Having a high credit score continues to be essential.

In the April-June period of 2024, individuals with exceptionally high credit scores above 780 enjoyed an average monthly car loan interest rate of 5.25%. In contrast, those with very poor credit ratings below 500 encountered substantially higher rates at an average of 15.77%. Experian reports. While The latest information from Experian as of 2025 does not provide detailed average loan interest rates across different credit tiers; however, in Q4 of 2024, the credit agency reports that applicants seeking new car loans typically had a credit score of 755 and were offered an interest rate of 6.35%, spread out over approximately 67.98 months. In contrast, those applying for used vehicle loans generally had a lower average credit score of 691 and faced higher interest rates at around 11.62% over about 67.2 months.

Compared to this, the data obtained from May is derived from myAutoloan.com According to data that employs somewhat distinct scoring ranges based on loan offerings, individuals rated between 451 and 599 can expect an average interest rate of 18.93% for new car loans and 19.18% for used car loans. Conversely, borrowers with a credit score of 750 or above were offered average interest rates of 11.38% for new vehicles and 11.63% for used ones, as indicated by the report. US News & World Report .

Final thoughts

Tariffs and uncertainties about future economic conditions are causing lenders to view subprime borrowers with credit scores of 620 or lower as increasingly risky. Moreover, the percentage of borrowers who owe more than their cars' value increased by 0.10% in April, highlighting the negative impact of consumers opting for extended auto loans with higher interest rates, which raises the likelihood of default. In December 2024, the Federal Open Market Committee (FOMC) declared the third reduction in the federal funds rate; however, borrowing costs remain elevated, leading to higher expenses for those seeking auto loans. This time around, FOMC members did not mention further reductions, indicating that lending rates might stay relatively high for individuals applying for auto loans.

Motorists have the option to compare prices among various creditors or opt to wait and observe if the rates drop further in the following months prior to submitting an application. Recently, Representative Bill Huizenga from the U.S. House of Representatives proposed a bill enabling purchasers of cars and trucks to deduct up to $2,500 in auto loan interest for tax purposes, provided that the vehicle was manufactured within the country. Should this proposal be enacted, it will affect automobiles bought during or after the 2025 calendar year.