Auto loans are being approved for more consumers with less-than-perfect credit scores, according to Experian Automotive. In the second quarter of this year, auto loans for car buyers with non-prime credit scores totaled 18.2 percent, compared to 17.6 percent in the second quarter a year ago.
Although the increase is small, it’s an early sign that auto lenders are considering and funding consumers with credit scores less than 700, Melinda Zabritski, director of automotive credit for Experian, told The Wall Street Journal.
"While lenders have not loosened their criteria to the levels we saw three years ago, we do see an upward movement in loans to those middle-risk tiers," Zabritski said.
Experian Automotive’s second quarter 2010 analysis also covered things like auto loan delinquencies, how much consumers are financing to buy their vehicles, what interest rate they’re paying and what their monthly payments are.
Auto loan delinquencies at the 30 and 60-day levels are both down in the second quarter, Experian reports. When compared to a year ago, 30-day delinquencies are down 5.88 percent to 2.89 percent, while 60-day delinquencies are down 11.85 percent to 0.71 percent.
The average amount financed for a new car increased $883 to $25,223 during the second quarter when compared to a year ago. Used cars also increased by $1,027 to $16,581.
Consumers’ monthly auto loan payments also increased during the second quarter for both new and used vehicles compared to the same time period in 2009. Those with new cars paid $5 more to have a $455 monthly payment. Shoppers who bought used cars paid $13 more for a $343 average monthly car loan payment.
Good news for car shoppers is that average auto loan rates are down on both new and used vehicles. For new cars, it fell from 5.5 to 4.98 percent in the second quarter. The average used car loan rate dropped from 9.29 to 9.02 percent.
Those with the best credit scores are only paying 4 percent for a new car loan, while those with the worst scores are paying 13.1 percent. Used car buyers are paying 5.71 percent interest rates if they have the highest credit scores, while those at the bottom of the credit tier are paying as much as 17.8 percent.
Experian Automotive said its second quarter data shows the overall auto finance market is showing recovery and strength.