Latest report from Experian Automotive shows a drop in both thirty day delinquencies and repossessions that could signal more good news for borrowers with damaged credit looking for to customers with problem credit hoping for an auto loan
What we believe
Borrowers with problem credit that are thinking of applying for an auto loan should be encouraged by the latest report from Experian Automotive that shows an increase in subprime lending during the second quarter of 2013.
Here at Auto Credit Express we view this as good news and we should know because for over twenty years we've been helping car buyers with bad credit searching for online car loans find those new car dealers that can offer them a real chance for car loan approvals.
In many cases, before they begin the process these applicants ask us, "How hard is it to get approved for a car loan?" The fact is that each situation is different although the chances of getting approved also depend upon the general lending climate – a topic that's addressed in the latest report from Experian Automotive.
Experian Automotive report
The August 13, 2013 report begins with the headline, "Auto Repossessions Reach Lowest Rate on Record."
It then goes on to state that "quarterly vehicle repossessions dropped by 14.8 percent to achieve the lowest rate since it began tracking the data seven years ago."
The report also noted that "30-day delinquencies decreased by 5.6 percent year over year, going from 2.52 percent in Q2 2012 to 2.38 percent in Q2 2013. While slightly up from Q1 2013 (by two basis points), this decrease brings 30-day delinquencies to its lowest level for the second quarter since 2006. Sixty-day delinquencies remain relatively flat year over year but still are extremely low at 0.58 percent."
Here is Experian's take on the results:
"Repossession and delinquency rates seen this quarter were lower than expected," said Melinda Zabritski, Experian's senior director of Automotive Credit. "The seasonality of the market usually has the first quarter showing the lowest 30-day delinquency rates, but even with the total automotive loan portfolio growing, consumers in the second quarter have done an exceptional job of meeting their financial obligations to keep the market strong."
The report also found that:
• Outstanding automotive loans grew from more than $682 billion in Q2 2012 to nearly $751 billion in Q2 2013
• Banks increased loan portfolios by $24 billion, credit unions by $18 billion finance companies by $16 billion, and captive finance companies by $11 billion
But if you fall into the higher-risk category you should also be aware that although the report states that "nonprime, subprime and deep-subprime loans account for 35.2 percent of all open vehicle loans in Q2 2013, up from 34.9 percent in Q2 2012", higher-risk lenders will typically continue to be diligent in approving loan applications.
In this case, Experian Automotive also found that "Average charge-off amounts for defaulted loans were up by $450, from $6,768 in Q2 2012 to $7,218 in Q2 2013."
With this in mind, borrowers might 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 continuing to be cautious while 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
Although lenders are increasingly willing to work with people with sketchy credit, they continue to insist that borrowers come into a loan with some type of investment (cash down, trade equity) in these loans.
Another good tip for credit-challenged buyers: if you've been turned down for a conventional car loan, it doesn't mean the only option is a BHPH dealer. At Auto Credit Express we match people that have experienced difficulties with their auto credit with new car dealers that can offer them their best opportunities for approved car loans.
So if you're ready to reestablish your car credit, you can begin now by filling out our online car loan application.