Smart Borrower Blog

Subprime Auto Loans Make a Comeback

Sep 5th, 2012 @ 7:17 PM by Amber Nelson

After facing an icy lending climate for the year or two after the financial crisis, subprime consumers are no finding a much friendlier atmosphere when it comes to auto loans, according to data from Experian Automotive.

For new car loans, subprime borrowers, those with less-than-perfect credit, made up 25.41 percent of all loan recipients in the second quarter of 2012, up 14 percent from one year earlier. That’s up even higher than before the financial crisis hit, when it 24.96 percent of loans were made to subprime borrowers in the second quarter of 2007.


And used-cars loans to borrowers with poor credit made up an even bigger share in the second quarter. Of those, subprime buyers made up 56.46 percent of all used-car borrowers, up from 52.70 percent one year ago.

Another indication of the lending trend is a drop in the average credit score among car loan borrowers. New-car buyers had an average credit score of 753 in the latest quarter, down from 762 during the same period in 2011, while used-car buyers had an average score of 662, down from 671.

“Despite the rise in subprime loans overall, there is still a strong sense of managing risk,” said Melinda Zabritski, director of automotive credit for Experian Automotive in a press release. “Because the overall lending environment has improved, lenders are making loans available to a wider range of customers. This is good for manufacturers and dealers, as it allows them to sell more vehicles. However, the lower loan-to-value ratios show that lenders are not willing to throw caution to the winds.”

The average loan-to-value ratio on new cars was 109.55 percent, down 0.61 percent from last year, while used-car loans had a loan-to-value ratio of 126.62, actually up 0.62 percent.

Part of the reason lenders are more willing to make loans to subprime borrowers is the fact that delinquencies have been falling, taking out some of the risk. Out of all loans in the second quarter, only 2.52 percent were 30 days or more late, down from 2.59 percent.


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

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