Still Room for Subprime Auto Loan Growth

The latest annual auto loan forecast from TransUnion predicts a continued rise in car loans even for credit-challenged car buyers

TransUnion Annual Auto Loan Forecast

TransUnion has released its latest annual auto loan forecast that calls for the number of auto loans and the delinquency rate to continue to rise through the end of 2015. Good news for borrowers looking for more options beyond in house financing dealers.

Still Room for Subprime Auto Loan Growth

“We expect the auto loan market to continue to perform exceptionally well in 2015,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “While the auto loan delinquency rate has slowly risen to a point where it will be above 2010 levels, we are still far off the peaks observed in 2008 and 2009 when delinquencies were more than 30 basis points higher.”

Car Buyers with Bad Credit

The forecast also addressed consumers with problem credit, noting that, “While delinquency levels for subprime borrowers have grown… the contribution of this segment to the overall delinquency rate has been muted because their share has remained between 14% and 15% during this timeframe. Subprime share of balances had peaked in 2009 at just over 22%.”

In fact, despite 4 million more car loans since the third quarter of 2007, according to TransUnion data “the number of subprime borrower accounts are 1.6 million fewer in Q3 2014 versus Q3 2007 (pre-recession).”

“The auto loan market has been especially strong for lenders, as much of the growth observed in the last few years has come from prime or better risk tiers,” said Turek. “There is room for growth in the subprime sector as evidenced by more competition. Prior to the recession the percent of subprime auto balances were nearly 5% higher than they are now.”

How Buyers with Problem Credit can Help Themselves

This may be good news, but consumers with less than perfect credit can help themselves by:

  • Knowing their credit scores and the information in their reports
  • Planning for a minimum 10 percent down payment in cash or real trade equity
  • Choosing an affordable car well below their maximum payment threshold
  • Keeping the loan term as short as possible. Again, a good down payment can help keep your term low.

The Bottom Line

The latest forecast from TransUnion predicts more growth in the subprime car loan sector – good news for credit-challenged car buyers. At the same time, these borrowers need to be aware their credit situation, have a down payment, pick an affordable vehicle and choose the shortest loan term possible in order to give themselves the best chance of success.

One more tip for these consumers: Auto Credit Express specializes in helping people with credit difficulties find dealers that can give them their best chances for approved auto loans.

So if you’re serious about getting your auto credit back on track, you can begin the process now by filling out our online auto loan application.

Posted on December 17, 2014 by in Auto Loans
Reader Comments

Comments are closed.

Apply Online Search