Consumer Credit Scores for Auto Loans Drop to Near Prerecession Levels

Published: May 29, 2012 by Editor

Experian Automotive today announced that average credit scores for consumers buying a vehicle have dropped to near prerecession levels.

According to its quarterly automotive credit analysis, the average credit score for financing a new vehicle dropped six points to 760 and dropped four points to 659 for used vehicles. Comparatively, credit scores in Q1 of 2008 were at an average of 753 for new vehicles and 653 for used.

Lenders also continued to set favorable terms for consumers during Q1 2012. Interest rates were lower year-over-year and loan terms were longer, giving consumers access to potentially lower monthly payments.

For example, the average interest rates dropped to 4.56 percent on new vehicle loans and to 9.02 percent for used. The average loan terms also increased, extending by one month for new and used vehicles to a total of 64 and 59 months, respectively.

“During the first quarter of 2012, car shoppers definitely found more favorable conditions for their vehicle loans,” said Melinda Zabritski, director of automotive credit for Experian. “A reduction in average credit scores, lower interest rates and a lengthening of loan terms are all very good signs for the market and offer great opportunities for consumers looking to make a deal on a new or used vehicle.”

The analysis also showed an increase in the average amount financed. The average amount financed on new vehicles rose by $589 in Q1 2012, reaching a total of $25,995. For used vehicles, the average amount financed increased by $411, bringing the average total to $17,050.

“Our report shows automotive lending is as healthy as it’s been since the market bottomed out in 2008,” continued Zabritski. “With consumers doing a good job of paying back loans on time and the percentage of dollars at risk reaching its lowest point in six years, lenders are able to extend terms and provide lower rates.

This thawing of the credit pipeline has been good for everyone, from consumers to lenders to automotive retailers.”

Some additional highlights from Q1 2012:

  • Vehicle loans to nonprime, subprime and deep-subprime customers increased by 11.4 percent
  • Auto repossession rates are down by 37.1 percent.
  • Thirty-day delinquencies dropped by 7.6 percent; 60-day delinquencies dropped by 12.1 percent.
  • Banks and credit unions gained market share. Banks grew by 7.5 percent to 40.21 percent market share, while credit unions grew by 10.5 percent to 16.89 percent market share.

Complete findings from the State of the Automotive Finance Market Q1 2012 credit trends analysis will be presented today in a Webinar at 11 a.m. Pacific/1 p.m. Central/2 p.m. Eastern.  Please join us.

Experian Automotive’s quarterly credit trend analysis features market reporting data and analysis from its AutoCount® Risk Report, which analyzes automotive lending markets based on a uniform measurement of credit quality that segments markets by geography, credit score and vehicle registrations, among other factors.

It also incorporates data from the Experian–Oliver Wyman Market Intelligence Reports, which provide topical, quarterly analysis; peer benchmarking options; and commentary on key issues facing the financial services industry.

Photo:  Shutterstock

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