According to first-quarter earnings reports and interviews with company executives last week, signals of a hotter credit market include:
1. More subprime loans
"Consumer credit availability has expanded, especially at the lower end of the credit spectrum," DeBoer said.
Lithia reported that subprime customers, with a FICO score below 620, accounted for 14 percent of its finance deals in the first quarter, up from 12 percent a year ago. Nonprime customers, with FICO scores from 620 to 680, made up 19 percent of the group's finance business in the quarter, up from 18 percent a year ago.
Meanwhile, AutoNation Inc. said both GM Financial (formerly AmeriCredit) and Chase Custom Auto Finance had increased business volumes and approval rates for AutoNation customers in the first quarter, compared with a year ago.
"Key nonprime and subprime lenders were buying deeper year over year," said AutoNation COO Michael Maroone in an April 26 conference call.
2. Greater customer demand for extended-service contracts
Group 1 Automotive Inc. said its extended-service contract penetration rose to just above 35 percent in the first quarter, an increase of 2.1 percentage points over the year-ago quarter.
Group 1 negotiated more favorable pricing in return for more business when it recently renewed its vendor agreement with the JM&A Group, said Pete DeLongchamps, Group 1 vice president of manufacturer relations.
Better wholesale prices allowed Group 1 to pass along some of the savings to retail customers, he said in a phone interview last week.
Lithia reported that its extended-service contract penetration rose to 42 percent from 40 percent in the year-ago quarter.
3. Higher loan-to-value ratios
Retailers also said lenders have been willing to lend more in relation to the value of a vehicle. That makes it easier for the customer to tack products such as extended-service contacts onto the same finance contract as the vehicle.
"The credit environment is improving, and that makes it easier to add finance products to the loan balance," said John North, Lithia corporate controller, in an April 28 phone interview.
That's partly because there's more room to add F&I products under a higher loan ceiling and partly because consumers are more comfortable buying extras, he said.
Roger Penske, chairman of Penske Automotive Group, said many lenders -- especially captive finance companies -- are advancing bigger loans and in some cases offering interest-rate incentives.
Penske said his group financed 75 percent of its new and used contracts combined with captive finance companies in the quarter. "I've never seen the OEM captives as aggressive," he said.