Throughout the recession, more and more car shoppers were getting rejected for car loans because lenders’ new higher standards meant they couldn’t qualify for a loan, even though a few years ago, they would have. Now that lenders are slowly loosening their criteria, more car shoppers are getting approved for auto loans, which is good news for automakers and the economy.
In October 2008, the average FICO score for new car buyers who were approved for an auto loan was 760. It has decreased since then, except for an increase a few months before January 2010. Since January, it has continued to drop. In October, the average FICO score for new car buyers was slightly less than 710, according to data from CNW Research.
This is good news for consumers who have good FICO scores, but may have a past blemish or problem with their credit. The lower the average FICO score drops for new car loan approvals, more consumers will be able to get a car loan for a new car.
Although shoppers with lower credit scores are getting approved for new car auto loans, we don’t know what auto loan rates they’re receiving. Someone with a score of 650 could get approved for a car loan for a new car, but might receive a high interest rate. Generally, shoppers with the best credit scores receive the best auto loan interest rates. Some automakers, like Toyota, require a credit score of 720 to receive its 0 percent auto loan rate incentive on a new vehicle.
CNW Research found that about 11 percent of new car auto loans were approved in October for consumers with a FICO score less than 670.
Even shoppers with subprime (less than 620) credit scores are getting approved for loans for new cars more often. Although it’s nowhere near January 2008’s 27 percent of subprime auto loan approvals for new cars, approvals have climbed the past four months. CNW found that 7.6 percent of subprime shoppers were approved for a new car auto loan in October, which is up from 6.9 percent in September.
Again, although subprime shoppers are being approved for new car loans more, they most likely are receiving high interest rates. The bottom line is that if you’re in the market for a new car and you’re credit isn’t perfect, you have a better chance of getting a car loan.