Auto Credit Loosens. Average Loan Now More Than $25,000

Easier loan access is a positive sign for the industry.

New vehicle loans to “credit-challenged” buyers grew by 12.7% in Q3 2010, compared with Q3 2009, as lenders loosened their auto credit standards slightly as delinquencies dropped.  

The share of new auto loans to non-prime people with a 620 to 679 credit score rose from 9.79% in Q3 2009 to 10.86% in Q3 2010. For sub-prime customers (credit scores from 550 to 619), their share of auto loans increased from 5.66% to 6.61%, while the share of auto loans to deep-sub-prime customers (credit scores below 550) rose from 1.46% to 1.59%.

The auto loan news is moderately good for the auto industry and suppliers as consumer confidence is weak, unemployment remains stubbornly high at 10%, and the Seasonally Adjusted Selling Rate remains stuck at 10 million units annually on a retail basis.

“Easier access to loans is a positive sign for the auto industry, as tighter loan criteria during the economic downturn represented a significant challenge for automotive manufacturers and their retail networks,” said Scott Waldron, president of Experian Automotive, the source of the data.

People are also are doing a better job of repaying auto loans, as 30-day and 60-day delinquencies both dropped in Q3 2010, compared with Q3 2009. The 30-day delinquency fell 8.43% (3.27% to 2.99% delinquencies). The 60-day delinquency rate fell 17.39% (0.93% to 0.77% delinquencies).

Findings from the Q3 report also showed that the total dollar volume of auto loans at risk of default dropped by $6.4 billion. The average loan amount for a new vehicle jumped to $25,273 in Q3 2010 from $22,743 in Q3 2009. The average loan amount for a used vehicle jumped to $16,706 in Q3 2010 from $15,729 in Q3 2009

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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