The auto finance industry continued its comeback in the fourth quarter of 2010. Not only did 30- and 60-day auto loan delinquencies drop sharply, but more consumers with less-than-perfect credit were approved for auto loans, according to Experian Automotive’s quarterly analysis of the auto finance market.
"The automotive credit market showed a significant improvement year over year during the fourth quarter of 2010," said Scott Waldron, president of Experian Automotive. "Consumers are definitely doing a better job of making their payments on time, and that bodes well for everyone in the automotive and automotive credit businesses. We continued to see lenders loosening credit during the quarter for nonprime and subprime customers, who represent a significant portion of the automotive market."
Experian Automotive found that the number of auto loans 30 days or more late declined from 3.3 percent in the fourth quarter of 2009 to 2.98 percent in the fourth quarter of 2010, which is a decrease of 9.71 percent. Auto loans that were 60 days or more delinquent fell 15.26 percent, from 0.94 percent in the fourth quarter of 2009 to 0.79 percent in the fourth quarter of 2010.
Consumers with average or bad credit found that more lenders were willing to give them an auto loan in the fourth quarter. The percent of auto loans for new and used vehicles that went to buyers with less-than-perfect credit and bad credit scores increased from 36.42 percent in the fourth quarter of 2009 to 38.42 percent in the fourth quarter of 2010. Experian Automotive points out that this is still lower than the percent of consumers with bad credit who were approved for a car loan in the fourth quarters of 2007 and 2008, when about 42 percent of these shoppers were approved.
Auto lenders continue to lower their requirements to get approved for an auto loan. The average credit score for a new vehicle auto loan in the fourth quarter dropped from 775* to 767, compared to the fourth quarter in 2009. During the same time period, the average credit score for used vehicle auto loan approvals fell only one point to 679.
Car buyers took out auto loans for an average of $25,789 for a new vehicle and $16,992 for a used vehicle during the fourth quarter.
"The automotive lending industry continues to gather positive momentum," said Melinda Zabritski, director of automotive credit for Experian Automotive. "The sharp drop in delinquencies is helping create stability in the marketplace and allowing lenders to develop a more aggressive approach. It is still a much more conservative lending climate than we saw in 2007 and 2008, but lenders are definitely becoming less risk averse."
*Please note that the credit scores mentioned in the story are Scorex PLUS scores, not FICO scores.