Auto credit access continued its gradual loosening in May, though high interest rates and growing negative equity pose risk for both lenders and consumers.

Cox Automotive’s analysis of the month’s auto credit conditions depicted a market balancing act in an environment of tempered optimism.

“The modest improvement in credit access, especially for subprime borrowers, may provide more opportunities for vehicle financing. However, rising contract rates and longer loan terms suggest consumers should remain cautious and consider the long-term cost of borrowing,” Cox said.

Its All-Loans Index rose a point to about 97 as loan approval rates increased 28 basis points and the subprime share rose 33 basis points.

Borrowers took on more debt burden to purchase vehicles, as the share of loans exceeding 72 months rose 53 basis points, those with negative equity increased 34 basis points, and the average down-payment percentage inched up by six basis points to 9.6%.

Credit availability increased in most channels, especially for used vehicles, Cox said. Captive lenders’ access was flat, while credit unions and banks loosened up modestly.

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