US lenders making more subprime car loans: Report
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- Published on Monday, 05 September 2011 09:24
NEW YORK: Lenders are making more subprime auto loans again, reversing the cautious approach they adopted after the credit crisis, an industry research firm said on Tuesday.
The portion of car loans made to subprime borrowers rose to 40.8 per cent in the second quarter from 37.2 per cent a year earlier, according to Experian Automotive, a unit of credit bureau and research firm Experian Plc.
The data shows how keen lenders are to boost their loan books amid a sluggish U.S. economy. Car loans are seen by lenders as relatively safe, because they are collateralized and repossessing cars is easier than foreclosing on homes.
Average credit scores for borrowers declined and the average term for their loans extended by one month to 63 months on new cars and 59 months on used cars.
"We are continuing to see growth in subprime, both new and used, and loans are becoming looser," Melinda Zabritski, director of automotive credit for Experian said in an interview.
In mid 2007, loans to subprime borrowers made up 46.2 per cent of the total. That easy lending led to a surge in delinquency rates before lenders turned conservative.
Tighter underwriting has resulted in fewer loans going bad. Loans delinquent by 30 days fell to 2.59 per cent of those outstanding in the second quarter of this year, down from 2.89 per cent a year earlier, according to Experian.
"Even though we have growth in subprime of late, our delinquency rates right now are extremely low," said Zabritski. "We have an overall stable market because we did have a lot of conservative lending in 2009 and 2010."
Repossessions have declined, too, with the per centage of car loans ending in repossession falling to 0.59 per cent from 0.62 per cent.
In a measure of market share tracked by Experian, the five most frequent lenders and their portions of the number of loans of all kinds made during the quarter were: Ally Financial, 6.93 per cent; Wells Fargo & Co, 5.79 per cent; Toyota, 4.84 per cent; JPMorgan Chase & Co, 4.75 per cent; and Honda, 3.92 per cent.
Source: economictimes.indiatimes.com
