The falling number of credit inquiries for auto loans, in the middle of a pandemic, should not shock anyone. After all, with many states under stay-at-home orders during March and people experiencing uncertain economic times, the Consumer Financial Protection Bureau's Consumer Credit Panel's look at how the coronavirus affected that month's credit applications is not surprising.
Nevertheless, they are stark reminders of the impact the COVID-19 pandemic is having. Looking at the number of credit inquiries in credit records, the panel found auto-loan inquiries dropped 52 percent between the first and last week of March, revolving credit card inquiries declined by 40 percent during the same period and new mortgage inquiries dipped by 27 percent.
"The observed drop in inquiries could be due to a drop in underlying credit demand, a drop in credit supply affecting inquiries either directly or indirectly by heightening consumers' expectation of being turned down for credit or a lack of opportunity for car and home sales to take place due to physical restrictions on movement and economic activity," the report said.
Focusing on auto-loan inquiries, there might be a few reasons the sector saw the biggest decline. Stay-at-home orders, social distancing, job furloughs and the closing of many businesses reduced the need for light vehicles. Also, buying a car — much like buying a home — is an emotional purchase that has a strong in-person element.
People want to see, touch, sit in and smell an SUV or pickup they may buy. You can't do all of that online.
Interestingly, certain regions of the country saw bigger declines in auto-loan inquiries than other parts. California, Nevada, Michigan and states in the Northeast saw the biggest drops. More modest declines were seen in Idaho, Kansas, Mississippi, Oregon and Utah.
The reason may not be so surprising. The panel report found the more COVID-19 cases a state had and the more unemployment insurance benefit claims residents filed, the fewer auto-loan inquiries there were.
"Clearly," the report said, "the drop in auto-loan inquiries is strongly correlated with both a state's case rate and its UI claims share."
As some states reopen and others slowly relax rules on what businesses can resume operations, it will be interesting to see how these numbers change with the next Consumer Credit Panel report.