The percentage of loans going to subprime buyers rose 8 percent in the third quarter, their first year-over-year increase since 2007, according to a report last week by Experian, a credit reporting agency. For new cars, the percentage of loans going to subprime rose 13 percent over the July - September period in 2009. The increase for used cars was 3 percent.
The majority of loans - 63 percent - still going to buyers with prime credit scores, which is defined as a 680 or above. But even that is settling into a more normal pattern. Before the recession, when credit was loose, just 51 percent of loans were going to prime buyers, according to Melinda Zabritski, director of automotive credit at Experian. Last fall, when credit was tight, 66 percent
of loans went to prime buyers.
Another sign that the credit mark is thawing: The loans people are getting are covering larger amounts and have longer terms. The average amount of financed for new cars rose $2,530 to $25,273, over the third quarter of last year, while the average amount financed for used cars grew $977 to $16,706. The average terms rose by about a month, although the lowest-tier buyers - those with scores of 550 or less - saw their terms rise by nearly four months.
Zbaritiski said the loosening in auto lending is likely to continue to grow in the near term. On Oct. 1, General Motors Co. finalized its purchase of AmeriCredit Inc., a Texas company that specializes in subprime lenders and has a $9 billion portfolio of subprime loans.
AmeriCredit had already been helping GM with subprime loans, which amount to 4 percent of the automaker's sales.
But GM now expects that to grow by a percentage point of two, a significant number considering that GM is on pace to sell more than 2 million vehicles in the U.S. this year.
Banks and auto financing companies believe they can afford to take bigger risks because consumers are being more cautious with their money and savings rates are up. The percentage of loans delinquent for 30 days fell 8 percent in the third quarter, to 3 percent, while the percentage of loans delinquent for 60 days fell 17 percent, to less than 1 percent.