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More Consumers Turned Down for Auto Loans

Rejection rate rising as lenders get pickier under tighter conditions.

July 19, 2023
More Consumers Turned Down for Auto Loans

Part of the issue is that lenders want to hold on to more cash after the spring bank failures in case of a withdrawals rush.

IMAGE: Pexels/Andrea Piacquadio

1 min to read


The combination of high inflation and high interest rates has caught up with the typical American consumer.

In June, the auto loan rejection rate hit more than 14%, a 5 percentage point jump from the last reading in February, according to the Federal Reserve Bank of New York, surpassing the application rate for the first time and reaching its highest point since the Fed started tracking it in 2013.

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The reserve bank said it observed the phenomenon across various loan types, not just auto loans, as far back as April, when its data showed about a quarter of banks indicated less willingness to offer consumer installment loans than when the year started.

In addition to the reality of higher consumer debt due to high inflation and high interest rates meant to reign it in, lenders want to hold on to more cash after the spring bank failures in case of a withdrawals rush.

Lenders, with less cash for loans, may require higher borrower credit scores or higher interest rates on their loans.

Delinquency rates on auto loans have been rising, especially among the youngest borrowers, recent data show.

Topics:Industry

Originally posted on Auto Dealer Today

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