Subprime Borrowers: It’s Used Cars or Nothing…For Now

The newest data from Experian Automotive shows that the average credit score was 775 for a new car loan in the third and fourth quarters of 2009. That’s right, 775! So basically that means if you are a subprime borrower in the market for a new car, you are out of luck (unless you can bring a hefty down payment).

The good news is that lenders seem to be loosening their lending standards for loans on used cars. The Experian Automotive report found that the average credit score for those loans fell to 680 from 684 in the latest quarter. A greater percentage of borrowers were subprime buyers, accounting for 36.42 percent, up from 33.99 percent in the third quarter of 2009.

The amount of money being financed also rose, with the average new car loan moving up to $25,580 from $24,429 last year. For used cars the average loan was $16, 276, up from $15,901 the previous year.

Another good sign for all car buyers is that auto loan delinquencies seem to be increasing at a slower pace. Experian Automotive found that loans more than 30 days late rose by one percent in the fourth quarter compared with the same quarter in 2008. Loans that were more than 60 days late increased by 3.5 percent.

“While delinquencies are still higher than the industry would like, we have not seen an alarming run-up in delinquencies like we did a year ago,” said Experian Automotive president Scott Waldron. “These are positive signs that the automotive lending industry is getting back on solid footing.

And even though delinquencies are still rising, the total amount of money at risk is declining. There was $26.58 billion worth of at-risk auto loans in 2009′s fourth quarter, down from $29.58 billion in the same quarter a year earlier.

So, subprime borrowers, bring lots of money to the table or settle for a used car. Or just wait. The economic winds seem to be slowly (maybe very slowly) changing for the better.