On July 31, the Board of Governors of the Federal Reserve System (Federal Reserve) issued its July Senior Loan Officer Opinion Survey on Bank Lending Practices, which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households in the second quarter of 2023. Banks reported that lending standards are currently on the tighter end of the range for all loan categories. Specifically, standards tightened for all consumer loan categories and demand weakened for auto and other consumer loans, while it remained basically unchanged for credit card loans. Looking forward, banks reported expecting to tighten standards further on all loan categories citing an uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans.

Specifically focusing on auto loans, the Federal Reserve reported:

  • A significant net share of banks reported increasing spreads over their cost of funds, while moderate net shares of banks reported tightening the extent to which loans are granted to some customers who do not meet credit scoring thresholds, increasing the minimum percentages of balances required to be repaid each month, and increasing the minimum required credit scores.
  • A significant and moderate net share of banks reported that standards on prime auto loans were on the tighter end of their ranges. Specifically, auto loans to prime borrowers had been reported on the easier end of the range in the July 2022 survey but are now on the tighter end.
  • A significant net share of banks reported expecting to tighten standards on auto loans over the rest of 2023.