Auto credit access holds steady in January as borrowing costs rise

Subprime lending resumes upward trend, extending access to higher-risk buyers.

On the Dash:

• January auto credit access held steady at its highest level since October 2022, despite some mixed metrics.
• Subprime lending and longer loan terms increased, expanding access for higher-risk borrowers.
• Rising negative equity and yield spreads signal higher risk and borrowing costs for consumers.

U.S. auto credit access remained steady in January 2026, with the Dealertrack Credit Availability Index holding at 100.0, matching December’s reading and marking the strongest performance since October 2022. While the overall index shows stability, individual metrics point to a complex mix of loosening and tightening in auto lending.

Approval rates for auto loans fell to 71.8% in January, down 110 basis points from December, though slightly higher than January 2025. Subprime lending resumed its upward trend, with the share of loans to higher-risk borrowers rising to 15.7% from 15.0% in December and up nearly 3 percentage points year over year. The shift suggests lenders are increasingly willing to extend credit to riskier borrowers despite declining approval rates.

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Borrowing costs edged higher in January. The yield spread increased 31 basis points to 7.14, while the average contract rate rose 39 basis points to 10.9%. Rising rates on 5-year Treasury notes contributed to these changes, reflecting higher costs for consumers. Longer loan terms also continued to gain popularity, with loans exceeding 72 months climbing to 28.0% of originations, up four percentage points from a year ago. Negative equity climbed to 56.3%, its highest level in recent months, signaling elevated risk for lenders and borrowers alike. Average down payments saw a modest increase to 13.4% but remain below year-ago levels.

Credit access varied across sales channels. Non-captive new vehicles and certified pre-owned cars showed notable gains, while franchised-used and all-used segments slipped slightly. Captive lenders led the month-over-month improvements with a 1.2% rise, while banks and credit unions eased slightly. Finance companies held steady, reflecting a cautious but generally positive lending environment.

Year over year, most channels and lender types posted looser credit conditions. Franchised-used and non-captive new segments showed the largest improvements, while banks and auto-focused finance companies led gains among lenders. Credit unions remained more conservative but still improved compared with a year ago.

For consumers, these trends suggest more financing opportunities, particularly for higher-risk borrowers, though rising negative equity and higher borrowing costs warrant caution. Lenders are expanding access but face growing exposure to risk as subprime lending and extended loan terms increase.

The January index reflects a mixed bag: while overall credit availability is stable, underlying trends highlight both opportunities and challenges in the evolving auto finance market.