What do car shoppers do when they get turned down for a car loan for a new vehicle? They go to option number two, buying a used car instead.
According to an ongoing survey by CNW Research, historically about 50 to 60 percent of new-car intenders turned down for a car loan chose to purchase a used vehicle. The vast majority were approved for a used-car loan.
But in 2008, that percentage changed. Only 38 percent of those who were rejected for a new-car loan were able to get approved for a used-car loan. Tighter credit criteria and the lack of lending appear to be the primary reasons for these rejections, CNW Research reports.
Used cars, like this 2006 Honda Accord, are a second option for buyers who are turned down for an auto loan for a new car.
On a more positive note for dealerships, as more people were rejected for new car loans, more than 940,000 used cars were sold in 2008.
The used car auto finance market isn’t immune to the tighter credit restrictions though. In 2008, more than 4.37 million used car sales were lost due to rejected auto loan applications, CNW Research reports. This number was nearly three times the units lost in 2006 and four times the units lost in 2007. The used car loan rejection percentage was 11.34 in 2008, which is five times higher than 2007.