Rejected for an auto loan a while back? Was it because your credit score was too low to qualify? May as well apply again, because lenders continue to loosen their requirements. Whether you’re shopping for a new car or a used one, financial institutions have been easing their cutoff points just enough to let more of the credit-challenged slip through.
That trend is continuing, according to the latest data from Experian Automotive, which covers auto-financing transactions from the second quarter (April through June) of 2012. Most comparisons are made against data from a year before: the second quarter of 2011.
Lending institutions have a “very stable portfolio” of loans compared to a year earlier, said Melinda Zabritski, director of automotive credit for Experian, in her quarterly report on the state of the auto-financing business.
To help determine changes that affect buyers with different credit histories, Experian divides people with open loans into five credit-score tiers: Super Prime, Prime, Nonprime, Subprime, and Deep Subprime. (That last group covers the severely credit-challenged, who still might have trouble qualifying for anything other than a minimal loan.) For convenience, some of the results provided by Zabritski divide loanholders into just two categories: Prime (including Super Prime) and Subprime (the lower three tiers).
Loan originations to subprime shoppers continue to grow, Zabritski explained, reaching pre-recession levels. The subprime share has risen by 14 percent on new vehicles, and 7 percent on used cars.
Delinquencies remain at “historic lows,” Zabritski reported, dropping a bit in the second quarter of 2012. Only 2.52 percent of open auto loans were reported as delinquent by 30 days, and 60-day delinquencies amounted to just 0.58 percent. When a financing institution finally decided to give up on trying to get payment from a delinquent debtor, the average “charge-off” amount was $6,768. That compares to $7,786 a year earlier, demonstrating that troubled buyers are managing to pay off a little more on their loans before calling a halt.
Credit scores of buyers who’ve been granted credit paint a useful picture of the overall economic situation in terms of car-buying. “We have reached pre-recession levels” in credit scores, Zabritski said. The average new-vehicle buyer had a score of 753 in the second quarter of this year, but would have needed 762 a year earlier, to get the same loan.
Subprime financing (the bottom three tiers) now accounts for nearly 44 percent of all auto loans–up from 40.8 percent in the second quarter of 2011. Looking strictly at new-vehicle loans, 25.4 percent now go to nonprime, subprime, or deep subprime buyers–though few of the latter are likely to get financed. As expected, those in the lowest three tiers get the biggest share of used-car loans: near 56.5 percent.
The average amount financed keeps rising. In April-June of this year, the average new-vehicle buyers took a loan for $25,714, versus $25,240 a year earlier. The average used-car buyer financed a hefty $17,433.
Loan payments and terms haven’t changed much. The average monthly payment for new vehicles in the period surveyed was $452, while used vehicles averaged $351. Both increased, but only slightly. Average loan term was 64 months for new vehicles and 60 for used.
Interest rates went down a bit for new vehicles (to 4.63 percent), but up for secondhand models (to 8.95 percent). All told, we’re still seeing “very low rates across the board,” Zabritski said.
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