Subprime borrowers see increase in number of auto loans

Auto lenders are increasingly working with subprime borrowers to help them obtain funding needed to purchase vehicles. This could be because financial institutions are beginning to look at alternative credit data to determine the creditworthiness of consumers. In the second quarter of 2012, loans given to nonprime, subprime and deep-subprime borrowers represented one in four of new vehicle funding, or 25.41 percent, according to a study conducted by a leading credit bureau. This is a 14 percent increase compared to the same quarter last year. Additionally, these loans surpassed the prerecession levels of the second quarters of 2007 (24.96 percent) and 2008 (24.49 percent). The average credit score for obtaining these loans dropped in the second quarter, perhaps highlighting the fact that lenders are relying on alternative financial data to determine the risk these borrowers might pose. One car manufacturer seeing an increase in sales due to the rise in subprime loans is Chrysler Group LLC. The company reported its best sales since 2007 in August, accounting for a 14 percent increase from the same time a year ago. Chrysler has had 29 consecutive months of year-over-year sales gains.