NEW YORK–The average credit score required for new auto loan approval has been increasing, according to a new analysis.
Not surprisingly, during the fourth quarter of 2024, lenders favored borrowers with good to excellent credit by offering lower interest rates, according to Experian’s State of the Automotive Finance Market.
But Interest rates for subprime borrowers increased while approvals decreased, leading to “a gap in affordable financing,” according to Bankrate.com.
David Thomas, director of content marketing at CDK Global, told Bankrate.com that auto loan access has been “impacted by general credit trends,” and that credit access — and credit denials — are at their highest points in a decade.
The Bankrate.com report cited Cox Automotive data that shows the trend is continuing, with April data indicating the share of subprime borrowers decreased by 280 basis points, or 2.8%, year-over-year.
‘More Difficult’
Qualifying with poor credit may become more difficult if the cost of vehicles rises significantly, the analysis added, noting the “likelihood of being approved for an auto loan with subprime credit continues to drop.”
Auto loan approval rates increased by 20 basis points in May, according to recent data from Cox Automotive cited in the Bankrate.com report.
“But while approval rates increased overall, they decreased sharply for those with subprime credit,” the report states.
Credit Score Increase
“This aligns with Experian’s data, which showed that the average credit score of borrowers purchasing a new vehicle has increased from 744 in 2020 to 755 in late 2024,” Bankrate.com stated. “The trend is similar for used vehicles, with the average credit score increasing from 681 to 691 over the same period.”
According to Bankrtate.com, a number of factors could be making lenders wary of borrowers with weaker credit, including historically high car prices coupled with high interest rates.
“Now, with tariffs and inflation looming, many lenders are seeking borrowers that present less risk,” the report added.