Auto loan approval rates rose in May as yield spread tightening and slight interest rate dips helped boost availability to its highest point in more than four years. The picture, though, includes cracks of risk.

Cox Automotive’s index hit nearly 104 as approval rates increased 180 basis points to 72%. A 70 basis-point pullback in subprime loan share helped offset the gains, though subprime share was still about 17% compared to 14% a year earlier.

Risk also manifested in record-high long loan terms, those longer than 72 months hitting 30%, up from 26% a year earlier, Cox said. Meanwhile, the share of loans in negative equity, though down 120 basis points from April, clocked in at 57%, up from 55% last May.

Down payments barely budged up by 10 basis points to 13½%, about 60 points under last May, Cox reported.

“The combination of longer terms, lower down payments, and more negative equity carried forward increases total loan cost and risk exposure over the life of the financing, regardless of how manageable the monthly payment appears,” Cox said.

“Extended loan terms at a new all-time high and elevated negative equity remain key watchpoints even as the headline index improves.”

Credit access was up across channels. Among lender types, captives fell 0.3%, though all lender categories were well above levels seen a year earlier, captives and banks leading the 12-month increase.

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