Auto lending more lenient to subprime borrowers
Apr 09, 2012 Philip Burgess
According to the latest Credit Trend Report from Equifax, subprime borrowers currently make up more than 46 percent of the amount of new auto loan originations. What's more, prime borrowers have lost some share of bank originations to subprime borrowers over the past two years. "The evidence of increased lending to subprime consumers demonstrates banks' ongoing efforts to grow lending by providing credit opportunities to more consumers," said Equifax chief economist Amy Crews Cutts. "Year-over-year results show borrowers are taking advantage of the new opportunities and seeking to diversify their financial activity, which is building momentum toward economic improvement." Specifically, new auto loan originations grew 2 percent from 2010 to 2011, from $17.3 million to $19.6 million. However, this is still lower than the six-year high of $21.5 million reached in 2007. Beyond auto loans, new credit in 2011 was 10 percent higher than 2010 figures, rising from $709 billion to $782 billion during that time period. Car shoppers should be aware of the current lending landscape, but also realize that interest rates aren't likely to drop much and down payments will still be required for those with low consumer credit scores despite improved lending, notes Auto Credit Express.