Auto Lending Increase to Subprime Borrowers
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UPDATED: Feb 9, 2021
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Banks and lending institutions are approving more subprime borrowers for auto loans, with approval numbers reaching prerecession levels, according to a report released Tuesday.
According to an Experian Automotive report, in the third quarter of the fiscal year (Q3), auto loans were approved at lower credit scores, with an average of 755. In comparison to Q3 in 2007, the average score for an auto loan was 749. One year ago, the average score was 763.
Melinda Zabritski, director of automotive credit at Experian Automotive, said leasing had continued trending upwards due to lenders openness to risk.
“Consumers were in a good position to obtain a vehicle during Q3,” Zabritski said in a release. “Expanding loans to lower-risk tiers opens the market for more car shoppers, while an increase in leasing means it is easier for consumers to get more vehicle for a lower monthly payment. Both of these trends are positive signs of a strong and recovering auto finance market, which ultimately benefits the consumers and the entire auto industry.”
The report shows the highest and lowest average credit scores that were tied to new auto loan originations. Volvo topped the charts with an average borrower score of 818, while Mitsubishi had the lowest average borrower credit score of 694.
|Auto Maker||Score (High to Low)|
|Other auto makers were included in study. Only the highest and lowest scores are listed.|
The analysis showed that the market share for nonprime, subprime and deep-subprime automotive loans for new vehicles grew by 13.6 percent. New leasing grew by 7.53 percent year-over-year.
Additionally, auto loans for new vehicles, financed to customers with nonprime, subprime or deep-subprime credit rates, increased from 21.87 in Q3 2011 to 24.84 in Q3 2012. For used vehicles, lending rates increased in the same Q3 time period from 51.60 in 2011 to 54.43 in 2012.
Experian also reported the manufacturers who secured the most auto loans. Toyota held the top position in Q3 2012 with 14.09 percent of all new financed vehicles. Ford claimed second position with 13.16, and Chevrolet followed with 11.10 percent.