Credit availability for auto financing in February rose to the highest level that experts have seen in seven years. But fueled in part by soaring prices, including for new vehicles, conditions prompted one expert to project that the U.S. economy is “in for some spring chills.”

That’s the gist of recent analysts from Cox Automotive, Moody’s Analytics and S&P Global.

Access to auto credit expanded in February, according to the Dealertrack Credit Availability Index, which increased by 1.9% to 104.0 in February, reflecting that auto credit was easier to get in the month compared to January.

Cox Automotive said in a report that access was looser by 8.6% year-over-year. And compared to February 2020, analysts indicated access was looser by 7.6%.

Cox Automotive added that the index in February was the highest recorded in the data series going back to January 2015.

“A key reason for the improvement in credit availability in February was that the average yield spread on auto loans narrowed to the lowest level in the monthly data series,” analysts said. “Even though the average auto loan saw a higher rate in February compared to January, bond yields increased by a larger amount, resulting in the lower observed yield spreads. Yield spreads were not the only factor favorable for consumers as most factors moved to support access.

“All loan types saw credit easing in February with CPO loans and used loans through franchised dealers easing the most. On a year-over-year basis, all loan types were easier to get with CPO loans having loosened the most,” analysts continued.

“Credit access also improved across lender types in February with banks having loosened the most. On a year-over-year basis, all lenders had looser standards with credit unions having loosened the most,” analysts went on to say.

Cox Automotive reiterated that each Dealertrack Auto Credit Index tracks shifts in approval rates, subprime share, yield spreads and contract details, including term length, negative equity and down payments. The index is baselined to January 2019 to provide a view of how credit access shifts over time.

“Across all auto lending in February, yield spreads narrowed, the subprime share grew, terms lengthened, negative equity grew and down payments declined, and the moves in those factors made credit more accessible. However, the approval rate declined, so that factor moved against accessibility,” analysts said.

Affordability softens

Meanwhile, the latest Cox Automotive/Moody’s Analytics Vehicle Affordability Index showed that new-vehicle affordability declined slightly in February but remained a bit better than December.

Analysts explained the inputs to the index moved in differing directions in the month. They said the number of median weeks of income needed to purchase the average new vehicle in February increased to 42.9 weeks from 42.8 weeks in January but remained below the record high of 43.2 weeks in December.

Supporting affordability, Cox Automotive and Moody’s Analytics indicated the price paid moved 0.5% lower following an even larger decline in January from what had been a record average price of $47,064 in December. They said median income also grew.

Analysts also mentioned the rest of the factors worked against affordability. Incentives declined slightly. The average interest rate jumped 49 basis points.

As a result of these moves, Cox Automotive and Moody’s Analytics calculated that the estimated typical monthly payment increased 0.6% to $689, which was a record high.

“After the decline in February, new-vehicle affordability was much worse than a year ago when prices were lower and incentives were higher,” analysts said in another report that detailed the Affordability Index. “The estimated number of weeks of median income need to purchase the average new vehicle in February was up 15% from last year.”

Those spring chills

S&P Global tackled the task of trying to project what might happen throughout the economy.

S&P Global said in a report titled, “Economic Outlook U.S. Q2 2022: Spring Chills,” that U.S. economic activity remained largely healthy through early March, based on its real-time indicators. But the firm said the Russia-Ukraine conflict worsened already troubling pricing pressures tied to continued supply-chain disruptions.

“We expect the economic damage from the conflict will lower U.S. GDP growth to 3.2% this year, matching our preliminary forecast in early March but a full 70 basis points lower than our November forecast of 3.9%,” S&P Global U.S. chief economist Beth Ann Bovino said in a news release highlighting the report’s availability.

“The main drivers for weaker than expected growth this year and the next are continued supply chain disruptions, exacerbated by the Russia-Ukraine conflict; higher prices, particularly for food and energy; and much more aggressive Fed policy to fight these higher prices,” Bovino continued.

S&P Global now expects seven rate hikes this year, with the Fed reducing the size of the balance sheet starting in May, and four to five the following year, pushed forward as the Fed tries to frontload rate increases to stamp out elevated inflation.

The firm projected policymakers could push interest rates up by 50 basis point as soon as May, “with more 50 basis-point rate hikes an increased possibility.”

Analysts added, “Already weakened, we see consumer confidence worsening in 2022 as conflict-driven higher prices weigh further on household purchasing power and stock prices weakening as investors move to safe-haven assets.

“With purchasing power squeezed, household spending will slow considerably. This squeeze was already a factor in 2021, given high inflation. The Russia-Ukraine conflict made it worse,” S&P Global went on to say.