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Lenders may benefit from economical auto buyers

May 10, 2013 Phil Burgess

Lending companies will be glad to hear that borrowers are becoming more frugal, at least when it comes to auto buying. A recent J.D. Power and Associates survey found that 79 percent of perspective vehicle buyers are interested in purchasing cars that can help them save at the pump.

Active shutter grill vents are also another fuel efficient feature that savvy buyers are interested in, as 76 percent of respondents want these cost-cutting vents on their next vehicles.

This may indicate that American borrowers are becoming more financially responsible in the wake of the Great Recession, which may bode well for short term lenders. As U.S. buyers become more thrifty with their finances, loan providers may see fewer defaults and more on-time payments.

"As they have come to understand the benefits of new automotive technology, they are increasingly interested in those that allow them to manage their fuel consumption with greater efficiency and help better manage their cost at the pump," said Mike VanNieuwkuyk, executive director of global automotive at J.D. Power and Associates.

Hybrid cars sales have also increased in the last year, which is no surprise because of an increased environmental focus. Experian recently released a hybrid car study that showed market share grew by 41 percent in 2012.

Buyers of hybrid vehicles also appear to have better consumer credit reports than traditional car purchasers which could indicate hybrid car loans are a lower risk for lenders. The average credit score for a consumer purchasing a hybrid car is 790, which is 35 points better than the mark for regular car buyers.

Also, many hybrid consumers are taking out small loans, despite the higher scores, showing that hybrid buyers may be more frugal. Experian's data indicated the average hybrid auto loan is $884 lower than other auto loans.

Loan terms on hybrid vehicles are also shorter on average by four months. This makes short term lending a viable option for hybrid buyers as the small loans can often be paid off quickly.