TU Report Gives Improved Picture of Bad Credit Auto Loans

Third quarter  auto delinquency report from TransUnion shows a seasonal rise in the auto delinquency rate but a big drop in the year over year rate which is encouraging news for consumers hoping to finance with a bad credit auto loan

More optimism

If you have bad credit and you you’re thinking of financing your next vehicle with a bad credit car loan, you should be interested in the results of the latest TransUnion auto delinquency report. The report is good news for us at Auto Credit Express due to the fact that we’ve been working with bad credit customers at the retail level for more than twenty years.

After observing how many bad credit buyers get treated at dealers that don’t offer car loans with bad credit, we even developed a web site that features a bad credit auto loan application. Applicants are then matched with dealers in their area that, like our own dealerships, specialize in helping customers with bad credit.

The alternative for most bad credit customers is a tote the note car dealer – which can be an issue since these car lots rarely report loans or payments to the credit bureaus – keeping buyer’s credit scores low and not reestablishing their car credit. This type of loan also increases the chance of repossession.

TransUnion third quarter report

In news from TransUnion earlier this week, the consumer credit site released its latest report on automotive lending – this time dealing with auto loans in the third quarter of 2010. These auto delinquency reports, it should be noted, are extracted from a huge database consisting of 27 million anonymous credit-active consumer records that are randomly sampled every quarter.

According to TransUnion, the national auto loan delinquency rate rose 9.4 percent between the second and third quarters of 2010, while the year-over-year delinquency rate fell by 28.4 percent in the third quarter.

The analysis

Although nonpayment behavior ticked up by almost 10 percent in the third quarter, the increase is attributed to expected seasonal factors and not an underlying change in how consumers are repaying their debt obligations. The good news is that TransUnion expects national auto delinquency rates to continue to be well below the peak of 0.86 percent — a rate experienced during the heart of the recession in the fourth quarter of 2008. Although newer lower risk loans are still entering the market, helping to mute delinquency rates, consumers remain cautious in the short term given the employment situation, focusing their attention on savings and lower consumption of discretionary goods,” said Peter Turek, automotive vice president in TransUnion’s financial services group. “This trend toward fiscal responsibility is reflected in year-over-year results, as auto delinquency rates now have dropped 28.4 percent since third quarter 2009 — the largest decline since the summer of 2001. On a state-level basis, 12 states experienced a drop in their quarter-to-quarter delinquency rates, while only 2 states showed an increase on a year-over-year basis.

TransUnion’s report also shows that national bank auto loan originations increased by 5 percent on a year-over-year basis.

What bad credit car buyers can do

For bad credit car loan applicants the bottom line is that the general loan landscape has improved considerably and banks, including bad credit auto loan lenders, are continuing to increase the actual number of loans they are writing.

Although the number of loans is increasing, when comparing the current number of loans to those approved more than three years ago, the actual number is still less. This means that someone with bad credit and a given credit score will still probably be charged a higher interest rate (with a shorter loan term) and be asked to put down a larger down payment than in, say, 2007.

Our advice to credit-challenged consumers applying for car loans with bad credit is as follows:

•    Know your credit score and what’s contained in your credit report
•    Plan on coming into the loan with at least 10 percent down in cash or trade equity
•    Keep the loan term as short as possible
•    Buy a compact of midsize vehicle and put off financing your dream car until after you’ve reestablished your credit.

The bottom line

Auto Credit Express has helped thousands of customers with bad credit buy cars and reestablish their auto credit at the same time through a nationwide network of affiliate dealers.

So if you are serious about reestablishing your car credit, you can begin the process by filling out our online bad credit car loan application now.

Posted on December 23, 2010 by in Auto Loans, Bad Credit, Lender Companies
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