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Subprime Auto Loans’ Recovery is a ‘Good Sign’

A report published in noted that the recovery of subprime auto loans is a “good sign” for both the auto industry and most of the consumers with nonprime credit.

Experian Automotive’s State of the Automotive Finance report, released last month, showed that the total dollar volume of outstanding auto loans in the first quarter of 2013 increased by 9.6 percent to $726 billion from $663 billion in the same period in 2012.

Subprime auto loans make up 35.4 percent which is slightly up from 34.9 percent last year. The report in observed that while this shows improvement, it is still short of the 40-percent level in the first quarter of 2009.

Moreover, the improvement in subprime auto loans came along with small increases in delinquencies. Thirty-day and 60-day delinquencies rose to 1.3 percent and 12.4 percent, respectively.

Melinda Zabritski, senior director of automotive credit, said that the increases in delinquencies and repossessions are never pleasant views, but are still lower than the recession levels.

“However, one thing most lenders will agree upon is that today’s subprime borrower is less delinquent than those in the past,” Zabritski added.

The latest report from Experian showed that subprime loans shared 45.2 percent of the loan market in the first quarter of 2013, an increase from 44.4 percent year-on-year.

In addition, average credit scores for new auto loans and used auto loans dropped by 5 and 2 points, respectively.

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