Bad Credit Car Loan Market Still Squeezed
by Steve Cypher on Tuesday, November 17th, 2009The latest quarterly report from subprime auto lender CPS shows the market for bad credit car loans is still very fragile
A market indicator
At Auto Credit Express we see where bad credit car loan lender Consumer Portfolio Services yesterday announced its operating results for the third quarter that ended on September 30th, 2009. And while its results were better than last year’s, the company continues to operate in the red.
Compared to 2008, CPS has managed to cut its operating expenses nearly in half from nearly $105 million to just over $57 million. But even as expenses were slashed, and losses were reduced by $2 million, net losses for the third quarter amounted to $4.3 million.
More tellingly, CPS managed total revenues of $177.2 million, down almost 40% from the $293.8 million in third quarter revenues for 2008. Like other bad credit auto loan lenders, CPS has seen its efforts hamstrung by the poor Asset-Backed Securities (ABS) market that has existed for over a year. Without a way to bundle and sell its loans on the open market, at least in the amounts and at the interest charges that it has done in the past, CPS has been unable to generate as much cash as it needs to originate new loans to match historical volumes.
“We believe the third quarter marked an important turning point for the Company in navigating the treacherous waters of the Great Recession,” said Charles E. Bradley, Jr. “The improvement in the capital markets that began in March has finally reached us. As previously reported, we opened a new credit facility in late September that has allowed us to begin our efforts to purchase meaningful amounts of contracts again. We also feel that attracting additional funding capacity should be achievable. In addition, subsequent to quarter end we took over the servicing on a $146 million portfolio which improves the operating leverage of our servicing platform. All of these events should put us on the path to growth in 2010.”
What all this means for bad credit car loans
While the latest news certainly demonstrates that there are still subprime lenders out there who are willing to approve bad credit auto loan shoppers, it also sends a definite signal that any recovery of the subprime lending market will be slow in coming. It also indicates that subprime lending’s return to pre-recession levels will take much longer than most pundits had anticipated.
At Auto Credit Express, our advice to consumers seeking bad credit car loans hasn’t changed since the beginning of the financial crisis:
• Know your credit score and what’s contained in your credit report
• Plan on coming into the loan with at least 10 percent down in cash or trade equity
• Keep the loan term as short as possible
• Buy a compact of midsize vehicle and put off looking at your dream car until after you’ve reestablished your credit.
We’re here to help you
For nearly 20 years, Auto Credit Express has been helping people with credit problems get approved for new and used car loans. Our affiliate dealers work with the leading subprime lenders to get you approved. Your credit report will get checked by the dealer, but once you’re approved, each month you make your car payment you are rebuilding your credit score and reestablishing your financial future.
Unlike many other services, we belong to the Better Business Bureau and our web site is SSL secured, ensuring the privacy of your personal information. Since our inception, we have processed over 1,000,000 online bad credit auto loans and closed over 1 Billion dollars in auto loans.
Visit us at www.autocreditexpress.com and see what we can do for you.
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