Subprime auto loans rising
Source: Agencies |
August 31, 2011, Wednesday
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Print Edition
Print Edition
LENDERS are making more subprime auto loans again, reversing the cautious approach they adopted after the credit crisis, an industry research firm said yesterday.
The portion of car loans made to sub-prime borrowers rose to 40.8 percent in the second quarter from 37.2 percent a year earlier, according to Experian Automotive, a unit of credit bureau Experian.
The data shows how keen lenders are to boost their loan books. Car loans are seen by lenders as relatively safe because they are collateralized, and repossessing cars is easier than foreclosing on homes.
Average credit scores for borrowers declined, and the average term for their loans extended by one month to 63 on new cars and 59 on used cars.
"We are continuing to see growth in subprime, both new and used, and loans are becoming looser," Melinda Zabritski, director of automotive credit for Experian said.
In mid-2007, loans to subprime borrowers made up 46.2 percent of the total. Tighter underwriting has resulted in fewer loans going bad. Loans delinquent by 30 days fell to 2.59 percent of those outstanding in the second quarter of this year, down from 2.89 percent a year earlier, according to Experian.
Repossessions have declined - the percentage of car loans ending in repossession fell to 0.59 percent from 0.62.
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