Consumer Car Buying Advice Blog

Latest report from Experian Automotive shows more loans are being made to car buyers with low credit scores

Sharing the news

Car shoppers with less than perfect credit should find the latest report from Experian Automotive especially encouraging if they are considering financing their next vehicle with a bad credit auto loan.

Here at Auto Credit Express this is the most encouraging news we’ve seen in quite some time. We should know, because we’ve spent more than two decades helping credit-challenged car buyers find a new car dealer that can offer them their best chance at arranging for approved auto loans.

Experian Automotive report

The September 4, 2012 report begins with the headline, “Subprime auto loans in Q2 2012 exceeded prerecession levels.”

It then goes on to state that “loans to customers in the nonprime, subprime and deep-subprime risk tiers accounted for more than one in four new vehicle loans in Q2 2012. With 25.41 percent of all new vehicle loans to customers in the nonprime, subprime and deep subprime risk tiers, loans to credit-challenged customers were up 14 percent compared to Q2 2011. In addition, new vehicle loans to credit-challenged customers now are higher than they were in Q2 2007 (24.96 percent) and Q2 2008 (24.49 percent) just prior to the financial market crisis.”

Experian also reported that the average customer credit scores for both new and used cars dropped year over year from Q2 2011 to Q2 2012.

Taking a deeper look

But while the report is good news for buyers with auto credit issues, if you fall into this category you should also be aware of the fact that even high-risk lenders are still being careful. According to Experian, subprime auto lenders are “keeping loan-to-value (LTV) ratios (the amount of money paid over the life of a loan versus the purchase price of the vehicle) lower than they were a year ago” from an average LTV ratio of 115.65 percent in Q2 2011 to an average LTV ratio of just 109.55 percent in Q2 2012.

Knowing this, consumers with car credit problems should consider following these tips:

• Know what’s in your credit reports as well as your credit scores.
• Choose an affordable small or mid-sized car and with a payment that is no more than 10% to 15% of your gross monthly income (the lower the better).
•With lenders looking for lower LTV ratios, the higher your down payment, the better it will look. Not including new car rebates or dealer cash, a down payment of 15% or more will increase your chances of an approval.

As we see it

While lenders are increasingly willing to work with people with poor credit scores, they are balancing this by insisting that buyers contribute to loans with larger down payments.

One more thing you should be aware of: if you’ve been turned down for a conventional car loan, it doesn’t mean the only option is a tote the note dealer. Auto Credit Express specializes in helping people with credit issues find a dealer for their best chance of securing approved auto loans.

So if you’re serious about reestablishing credit, you can begin now by filling out our online auto loans application.

Tags: Bad Credit, subprime lenders

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