The first quarter 2014 auto delinquency report from TransUnion shows an increase in car loan balances and the number of loans to credit impaired borrowers
Credit-Challenged Car Buyers
Here at Auto Credit Express we've had a chance to review the latest report from TransUnion on auto delinquencies and, in our opinion, it contains good news for consumers with poor credit that need to finance a car.
It also goes a long way towards answering one of the most-asked questions we get, "How hard is it to get a car loan with problem credit?"
Latest TransUnion Report
According to TransUnion, the amount of car loan debt for borrowers has risen close to 13% since the economy began to turn around – a trend that began in the first quarter of 2011.
Additionally, the national auto loan delinquency rate (borrowers 60 or more days past due) "increased to 1.00% in Q1 2014, up from 0.95% in Q1 2013. However, auto loan delinquencies dropped sharply on a quarterly basis from 1.14% in Q4 2013. The delinquency rate remains below the Q1 average of 1.10% observed between 2008 and 2014."
"The continued increase in auto loan debt is a healthy sign that auto sales and the auto loan market continue to perform well," said Pete Turek, vice president of automotive in TransUnion's financial services business unit. "It's also encouraging to see auto loan delinquency rates remain at low levels; the 14-basis point drop this last quarter is especially encouraging."
Good News for Subprime Lending
The report also contained good news for car shoppers with past credit problems or trying to get auto financing with bankruptcy history:
According to TransUnion, "The subprime delinquency rate (those consumers with a VantageScore 2.0 credit score lower than 641 on a scale of 501-990) increased from 5.11% in Q1 2013 to 5.52% in Q1 2014. The share of non-prime, higher risk loan originations (with a VantageScore 2.0 credit score lower than 700) grew by 34 basis points (from 31.62% in Q4 2012 to 31.96% in Q4 2013). This percentage is still lower than what was observed at the beginning of the recession (37.34% in Q4 2007)."
"Auto loans to the subprime population are growing as are delinquency rates for that group, but as an industry the level of risk is well managed," said Turek.
If You Have Lousy Credit
Keeping the report in mind, here is some advice if you do have credit issues and you're thinking of applying for an auto loan:
- Know your credit scores as well as the information on your credit reports (all 3 if possible)
- Plan on at least a 10 percent down payment in cash or actual trade equity
- Keep the loan term as short as possible
- Consider a subcompact, compact or affordable midsize vehicle – setting aside anything more expensive until you've re-established your credit.
The Bottom Line
As it stands, car buyers in a broader credit profile now have a better chance of getting an application for credit approved than they have in the past for years.
Even better news is that Auto Credit Express matches car buyers with past credit problems to dealers that can offer them a good opportunity for a car loan approval.
So if you're ready to reestablish your auto credit, you can start now by filling out our online auto loan application.