Lenders are rejecting more applicants for car loans than ever, according to a new study from the New York branch of the Federal Reserve. More than 14% of applicants were rejected over twelve months ending in June – a record high.
The numbers come from the Fed’s Survey of Consumer Expectations Credit Access Survey, published every four months. Last time the Fed published the data, in February, 9.1% of applicants had been turned down.
It’s not just car loans – Americans were rejected for all types of credit 21.8% of the time, the report says.
The “reported probability that a loan application will be rejected increased sharply for all loan types,” the Fed says. It rose to 30.7% for auto loans, another record high.
Rejection rate is just one part of understanding the car loan market. Kelley Blue Book parent company Cox Automotive reports on loan conditions every month rather than every four months, like the Fed. Cox Automotive found that May was the worst month to apply for a car loan in more than two years.
In June, conditions improved slightly. Lenders asked for smaller down payments and were willing to lengthen the average loan term, which can decrease the cost of monthly payments. But lenders still rejected more applicants than in a normal month.
Still, conditions may not improve much this year. A separate Federal Reserve study polls loan officers at banks quarterly about their expectations for the future. In April, 39% of loan officers told the Fed they expect further to tighten their lending standards before year’s end.
