Lenders are tightening the purse strings just as inventory improves on the car lots.
that found that the overall rejection rate for loan applications was 21.8 percent. It's bad—but not quite as bad—for auto loans, which hit 14.2 percent in June, up from 9.1 percent in February. That 5 percent jump puts auto loan rejection rates at their highest level since the Fed started collecting this data in 2013.Would-be-borrowers saw their applications for other loan types rejected at an increased rate, too: 21.
The reasons for the increased rejections can be found in the broader economy, especially the inflation of the last few years and the fact that rising interest rates have increased the amount of debt people have. Lenders are worried about borrowers being unable to pay, with good reason. Analysts at Cox Automotive noted last month that "auto loan performance resumed deteriorating in May as delinquencies and defaults both increased for the first time in three months.
It may take a while before things get better. The Fed's recent numbers say that the average reported probability that an applicant will be rejected for an auto loan in the next twelve months is almost 31 percent. That's the highest level since October 2014, when the expected rejection rate hit just over 28 percent.
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