Getting approved for a car loan is becoming easier for American consumers, with auto credit availability reaching its strongest level in more than a decade. Cox Automotive’s October 2026 Dealertrack Credit Availability Index climbed to 107.1, marking its sixth consecutive monthly increase and its highest reading since April 2015.
However, the improvement comes with some warning signs. Subprime borrowers accounted for a growing share of auto financing, while nearly six in ten financed vehicles involved negative equity. The figures point to a market where lenders are becoming more willing to extend credit, but many buyers are still taking on significant financial risks.
Dealertrack Index Reaches Its Highest Reading Since 2015
Cox Automotive’s Dealertrack Credit Availability Index increased 0.1% in October, moving from September’s revised reading of 107.0 to 107.1. Although the monthly improvement was small, the index was 8.9% higher than October 2025. Its latest reading represents the strongest auto credit availability since April 2015.
The index tracks six key indicators that influence consumers’ ability to secure auto financing. These include loan approval rates, subprime lending, yield spreads, loan terms, negative equity and down payment requirements. January 2019 serves as the benchmark, with a starting value of 100.
A higher reading generally indicates that obtaining auto financing has become easier, although it does not mean every applicant will receive approval or qualify for favorable interest rates.
October marked the sixth consecutive monthly increase, but the improvement was weaker than in previous months. Three components contributed positively to the index, while three offset much of the progress.
The largest positive contribution came from the increasing share of loans going to subprime borrowers. A decline in longer-term loans and a wider yield spread were among the biggest factors limiting the improvement.
The overall loan approval rate increased 20 basis points to 73.9%. That was 2.4 percentage points higher than the 71.5% recorded in October 2025. However, this improvement requires some context.
Cox Automotive explained that the increase largely reflected the exit of a near-prime lender with a relatively low approval rate. Consequently, the national average improved even though approval rates declined across most individual lending channels and lender types.
The distinction matters because a higher national approval rate does not necessarily mean every borrower has a better chance of getting financing.
Changes in the types of lenders included in the data can affect the average, while individual applicants continue to face different requirements depending on their credit profiles, income, debt obligations, and down payments.
The greatest improvement in credit access came from captive lenders, which are financing companies associated with vehicle manufacturers. Their credit availability increased 2.4% in October, reaching a new series high. Credit unions also improved by 0.4%, their strongest reading since October 2022.
Banks recorded a small 0.1% decline, while finance companies experienced a larger 1% decrease. This mixed performance suggests that financing conditions are improving in some parts of the market more quickly than others.
Subprime Lending and Negative Equity Raise Concerns
One of the most significant developments in October was the increase in subprime lending. Borrowers classified as subprime accounted for 17.9% of auto loans, up from 17.4% in September. This was the third consecutive monthly increase and 1.8 percentage points higher than the 16.1% recorded in October 2025.
Subprime borrowers generally have weaker credit histories or lower credit scores than prime borrowers. They are often considered higher-risk customers because lenders may face a greater possibility of missed payments or defaults. However, subprime does not automatically mean someone cannot afford a vehicle or will fail to repay a loan.
The increase was widespread, with the subprime share rising across all four lender types and every financing channel tracked by Cox Automotive. It was also the single largest contributor to the October improvement in the Dealertrack index.
For consumers, greater availability of subprime financing can create opportunities to purchase a vehicle despite previous credit difficulties. However, these loans often carry higher interest rates, making it particularly important to understand the total amount that must be repaid.
Another warning sign was the increasing share of loans involving negative equity. In October, 58.7% of financed vehicle transactions involved borrowers owing more on their existing vehicle than it was worth. That represented an increase of 0.9 percentage points from September and 4.9 percentage points compared with October 2025.
Negative equity commonly occurs when a vehicle depreciates faster than its loan balance falls. For example, someone who owes $25,000 on a vehicle worth $20,000 has $5,000 in negative equity.
If that person trades the vehicle for another one, the dealership may offer to include the outstanding $5,000 in the new loan. This makes it possible to purchase another vehicle without paying the entire difference immediately.
However, the borrower starts the new financing agreement owing more than the replacement vehicle’s purchase price, potentially increasing interest costs and making future negative equity more likely.
Cox Automotive reported that the October increase in negative equity was concentrated in used-vehicle financing channels. Its 58.7% figure is the share of loans in its tracked sample involving negative equity, not the percentage of all American vehicle owners who are underwater on their loans.
Down payments also increased slightly, reaching 13% in October compared with 12.8% in September. Although that was a positive development, the figure remained below the 13.3% recorded in October 2025.
The combination of more subprime lending and rising negative equity suggests that easier credit access is partly being supported by borrowers accepting more complicated financing arrangements. Getting approved may be easier, but that does not automatically make the resulting loan affordable.
Higher Interest Rates and Long Loan Terms Could Limit Affordability
While more consumers are gaining access to financing, borrowing costs remain a major concern. Cox Automotive reported that the average auto loan contract rate increased 24 basis points in October, reaching 11.46%. This was its highest reading since March 2026.
The five-year Treasury yield also increased, rising 13 basis points to 4.93%, its highest level since June 2007. The difference between the average auto contract rate and the Treasury yield widened from 6.42% to 6.53%. Cox Automotive identified this wider yield spread as one of the factors weighing on the credit availability index.
For buyers, a higher contract rate means more interest paid over the life of a loan, assuming other loan terms remain unchanged. Even a relatively small rate increase can make a difference when financing an expensive vehicle over several years.
Longer loan terms are another important part of the affordability problem. In October, 31.1% of auto loans had repayment periods exceeding 72 months. That was down from September’s record high of 31.8%, marking the first monthly decline since March. However, the share remained 3.4 percentage points higher than the 27.7% recorded in October 2025.
A loan lasting 84 months or longer can reduce the monthly payment compared with a shorter agreement, but it also means the borrower remains in debt for a longer period. Interest accumulates over more months, and the vehicle continues depreciating while payments are being made.
This can become particularly problematic if the owner needs to sell or trade the vehicle before the loan is paid off. If the outstanding balance is higher than the vehicle’s market value, the difference must be paid or potentially included in another loan.
The combination of longer financing periods and negative equity can therefore create a cycle in which buyers repeatedly carry outstanding debt from one vehicle into another. Although this approach may make a purchase appear affordable initially, it can increase financial pressure over time.
For someone shopping for a vehicle, the most useful approach is to compare the annual percentage rate, loan duration, down payment, amount financed, and total repayment amount rather than focusing exclusively on the monthly payment.
Getting offers from multiple banks, credit unions, and manufacturer-backed lenders can also help identify more competitive financing.
Buyers with an existing vehicle loan should request separate figures for the trade-in value and outstanding loan balance. This makes it easier to identify negative equity before agreeing to another purchase.
A larger down payment, a less expensive vehicle, or waiting until more of the existing loan has been repaid may be safer alternatives to rolling substantial debt into a replacement vehicle.
For lenders, the rising subprime share and negative equity levels represent additional risks. If borrowers face higher monthly payments or financial difficulties, lenders may experience more defaults and losses. Higher contract rates can compensate for some lending risk, but they can also make vehicles harder for consumers to afford.
October’s Dealertrack results reveal a complicated picture of the American auto financing market. Credit availability has improved for six consecutive months, reaching its strongest level since 2015, but the gains are accompanied by higher subprime lending, increasing negative equity, and rising borrowing costs.
The market is making it easier for more consumers to obtain financing, yet the quality and affordability of those loans remain important concerns.
