More Car Loans Going to Borrowers With Bad Credit If you've been rejected for a car loan due to poor credit during the last year, and you'd still like to buy a new car, it may be time to apply for that loan again. Experian Automotive (EXPN) reported on Tuesday that the automotive credit industry increased the share of new car loans going to credit-challenged borrowers by 12.7% in the third quarter of 2010 compared to the same period last year, a sign that lenders are loosening their credit criteria.

The report also found that the number of borrowers defaulting on their loans declined in the third quarter, saving the industry $6.4 billion.

During the third quarter, new loans to nonprime customers (those with credit scores in the 620 to 679 range) rose to 10.86% of all loans from 9.79% in Q3 2009. Loans for subprime customers (with credit scores from 550 to 619), increased to 6.61% from 5.66% in 2009, and loans to deep-subprime customers (credit scores below 550) rose to 1.59% from 1.46%.

Customers were not only able to gain approval for more loans, but for higher loan amounts. The average loan amount for a new vehicle jumped to $25,273 in he quarter, up from $22,743 a year earlier. The average loan amount for a used vehicle jumped from $15,729 to $16,706.

"With delinquencies down and less money in their portfolios at risk, lenders can be a little less conservative in their lending strategies," said Melinda Zabritski, director of automotive credit for Experian, in a statement. Zabritski also said that lenders were now offering a greater variety of loans to meet the needs of a wider group of consumers.

The relaxing of credit standards is expected to help keep up the positive sales momentum that the auto industry has seen this year. Morgan Stanley's Auto Industry Outlook for 2011 calls for auto sales to rise about 10%.


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fcsdotcom

Hi Matthew,
Great article. A lot of people think you only need to check your score every few years--or when you’re thinking about getting a loan for a large purchase. However, if you wait until the last minute to check your credit, you won’t have time to dispute any mistakes or inaccuracies that might be negatively affecting your score. With a freecreditscore.com membership, you get daily credit monitoring, alerts, and access to a wealth of information and resources. Not to mention, you get access to our Customer Care representatives who are dedicated to providing you answers and support for your credit-related needs.
--Harris Hunt, Senior Director, Product Management

December 17 2010 at 9:11 PM Report abuse rate up rate down Reply
jkennedy806

I think for next year's New Year's Resolution instead of doing the conservative thing and living within my budget, and saving my money -- I am going to run up all the credit cards I can, go on Food Stamps, get all the government assistance I can, get a new car or two. It just seems that if you save, it eventually works against you. Twice now I have been wiped out -- First during the S & L (too big to fail crisis) and then I started again and now zip zero nadda. I don't understand -- it's okay for an illegal immigrant to sneak into this country get a job, get assistance, get healthcare, get Social security, etc. but for me a US citizen, it's like working against a tidal wave.

December 08 2010 at 9:16 AM Report abuse +1 rate up rate down Reply
1 reply to jkennedy806's comment
ftruckt

well said. seems at times any more a person is better off not working to make any gains in their life.

December 08 2010 at 10:36 AM Report abuse rate up rate down Reply
Frank

Maybe "credit challenged" people should not be borrowing more money....isn't this the same BS that the real estate industry went through? People need to live within their means. People ...LEARN from the past....

December 08 2010 at 8:47 AM Report abuse +1 rate up rate down Reply
BGSUMom7

More bad credit lending? Great idea. Sure, almost everyone needs a car, I get that. I was particulary perplexed by the "qualifying for higher loan amounts" statement. Didn't we go through this with the housing market, where "everyone" can afford a home? As soon as we go back to good old fashioned SAVING MONEY for a downpayment (houses AND cars), all this bankruptcy and delinquency BS might just stay at more reasonable levels. Note to those who have experienced life-altering circumstances such as inintentional job loss, or death of a bread-winner...I wish you all the best. Really. But to those who wish to live beyond their means...go F yourselves.

December 08 2010 at 6:37 AM Report abuse +1 rate up rate down Reply
kv37

money is like fertilizer, it doesn't do any good unless you spread it around

December 07 2010 at 8:28 PM Report abuse -1 rate up rate down Reply
Greg

Those of us who aren't buying cars will shortly be helping other people with their monthly car payments, just like those of us who don't have hpmes/mortgages are currently helping to pay the homes/mortgages of those who do. I rent a conservative apartment and drive a 12 year old car. But in reality, who is the fool here?

December 07 2010 at 6:27 PM Report abuse +4 rate up rate down Reply
jkennedy806

Is it just me or am I having a deja vu moment --

December 07 2010 at 6:05 PM Report abuse +1 rate up rate down Reply
madmax821

never a new car again, can't afford to drive it off the lot and loss at least 5 gs. used used used

December 07 2010 at 2:08 PM Report abuse +3 rate up rate down Reply