Lenders are loaning less money, less often to subprime and deep subprime buyers these days.
While auto sales sizzled in August and have been brisk for the year, the lenders helping to move that metal are no longer relying on the subprime buyers to keep the good times rolling.
The percentage of new vehicle loans going to consumers in the subprime and deep subprime segments was at 15.1% in Q2 2014, down from 22.1% in Q2 2013, according to Experian Automotive. Subprime buyers have credit scores ranging from 619 down to 550 while deep subprime is anyone below 550.
The numbers are still higher than the low of 10.2% during the depths of the recession in 2009, the current figures are still well below the prerecession level highs of 16.6% in Q2 2008 and 19.9% in Q2 2007, the company reported.
“Although we’ve seen relative stability in the automotive industry the past several years, lenders are still showing cautionary signs when lending to the subprime market and keeping their risk at manageable levels,” said Melinda Zabritski, senior director of automotive finance for Experian, in a statement.
The average monthly payment for new and used vehicles hit new highs during the second quarter. The average monthly payment for a new vehicle jumped $10 to $467 while the used car payment rose $4 to $355.
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“As for consumers, as long as those in these higher risk segments continue to pay their bills on time, keep delinquent balances in check and select a vehicle that fits within their budget, they should still be able to obtain the necessary financing to purchase a vehicle that meets their needs.”
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A few other trends about buyers, include:
- Of all new vehicles sold in Q2 2014, leases accounted for a record high 25.6%, up from 23.4% the previous year
- The interest rate for a new vehicle was up from 4.46% in Q2 2013 to 4.59% in Q2 2014
- Used vehicle interest rates were up from 8.56% in Q2 2013 to 8.82% in Q2 2014
- The average credit score for a new vehicle loan in Q2 2014 was 711, up from 699 a year earlier
- The average credit score for a new vehicle lease rose to 717 in Q2 2014 from 706 in Q2 2013
Not only are they lending less often to subprime and deep subprime buyers, they’re giving them less money as well. For new cars, the drop is smaller for subprime borrowers than deep subprime: .8% compared with 2.6%.
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The average new vehicle loan amount to a subprime borrower dropped to $27,347 in Q2 2014 from $27,563 in Q2 2013, and new loans to deep subprime borrowers fell to $24,836 in Q2 2014 from $25,486 in Q2 2013.
The average amount financed rose in Q2 2014 to $27,429 from $26,526 in Q2 2013.
For used vehicles, the average subprime borrower loan fell to $16,546 in Q2 2014 from $17,020 in Q2 2013. Used deep subprime loans fell to $14,358 Q2 2014 from $15,113 in Q2 2013.