Smart Borrower Blog

Auto Lending Market Starting to Thaw Out

Dec 8th, 2010 @ 7:50 PM by Amber Nelson

The lastest statistics suggest that the ice is melting on the car loan credit, especially for borrowers with less than perfect credit.

A report released yesterday from credit reporting agency Experian showed that the 12.7 percent of all new car sales went to non-prime and subprime buyers in the third quarter, a 13 percent increase from the previous year. That rate has not increased since 2007. The percentage of used car loans to subprime borrowers grew by 3 percent.

Now 63 percent of all car loans are going to prime credit buyers (those with scores above 680). Last year 66 percent of all borrowers had great credit.

“Easier access to loans is a positive sign for the auto industry, as tighter loan criteria during the economic downturn represented a significant challenge for automotive manufacturers and their retail networks,” said Scott Waldron, president of Experian Automotive as quoted on the Auto Loan Daily website. “Making it easier for consumers to obtain credit can only help the auto industry moving forward.”

Car buyers also took out larger loans with longer terms in the third quarter, according to Experian. The average new car loan rose to $25,273, up $2,530 from the year before. For used cars, loans increased by $977 to an average of $16,706. Consumers took out loans with terms that were on average one month longer than the same quarter of 2009, and among just the lowest credit borrowers (credit scores below 550) the average term was four month longer.

What’s more delinquency rates dropped in the past year. Total loan delinquencies of 30 days dropped by 8 percent to 3 percent. At the same time, the percentage of loans delinquent for 60 days fell by 17 percent to just 1 percent.

“Overall, our Q3 analysis shows that there are very positive signs for the automotive lending industry,” said Melinda Zabritski, director of automotive credit for Experian. “With delinquencies down and less money in their portfolios at risk, lenders can be a little less conservative in their lending strategies. Consumers still have the impression that lending is extremely tight, so it will be important for lenders and automotive retailers to educate car shoppers that there are more loans available to a wider group of consumers.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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