Equifax Report Shows Continued Recovery in Auto Loansby Steve Cypher on Tuesday, November 27th, 2012
Consumers with credit problems should take note of the latest findings in the National Credit Trends Report from Equifax.
Here at Auto Credit Express we believe this information could be especially helpful for consumers who currently plan on applying for high risk auto loans. We should know because we’ve spent the last twenty years helping car shoppers with poor car credit find dealers that can offer them their best opportunity at approved auto loans.
We also believe it’s important for car buyers with less than perfect credit to understand the current lending environment in the auto loan industry before applying for a loan, which is why the latest information from Experian could prove to be helpful.
Consumer credit trends
On November 21st, Experian released the latest data from its National Consumer Credit Trends Report noting that, according to Equifax Chief Economist Amy Crews-Cutts “Consistent growth in the auto industry is influenced by a combination of factors, including the decreasing amount of write-offs and severely derogative accounts paired with corresponding increases in the numbers of total originations and loan sizes.”
Ms. Cutts also went on to state that, ” Sustained recent consumer demand for auto leasing, financing and purchase has driven a return of this portfolio to pre-recession numbers more rapidly than any other lending sector.”
This report specifically addressed auto loans. This is what it had to say:
• New auto loan originations year-to-date through August 2012 totaled more than $283 billion, which is the highest for that timeframe since 2006 ($297.5 billion).
• The average loan amount ($19,492) for the month of August 2012 stands at a six-year high, and is only exceeded by same-time 2006 ($20,291).
• The most current data shows the number of new auto loans funded by auto finance companies increased 31% from the recession low for the month of August 2009 from 717,600 to more than one million in August 2012, a five-year high.
• The most current data also shows the number of new auto loans funded by bank, savings and loan or credit union reached 984,300 in August 2012, a seven-year high for that month.
High risk auto lenders
Considering this latest information, it could have the following effects on car loans for people with low FICO scores:
• Lending will continue to improve, although the interest rates for most subprime auto loans typically won’t be dropping and down payments will still be required from most near-prime and lower lenders.
• With more customers with weak credit requesting loans, most bad credit lenders can still afford to be selective during the approval process.
Keeping that in mind, credit-challenged applicants should consider these tips:
• Know your credit scores and the information showing in your credit reports.
• Choose an affordably-priced car with a monthly payment that’s no more than 10% to 15% of your gross monthly income (the lower the better).
• The higher the down payment, the better. Not counting rebates or dealer cash, 15% or more will increase your chances of an approval.
The Bottom Line
Auto loan applicants with credit issues should be aware of what is going on in auto lending. But even with a credit denial from a conventional auto lender, this doesn’t mean the only alternative is a tote the note car lot.
One more thing: Auto Credit Express specializes in matching consumers with poor auto credit with those new car dealers that can offer them their best chance for approved auto loans.
So if you’re ready to reestablish your good credit, you can begin now by filling out our online car loans application.