While subprime lending is on the rise, loans are balanced by lower loan-to-value ratios
SCHAUMBURG, Ill. — Experian Automotive today announced that loans to customers in the nonprime, subprime and deep-subprime risk tiers accounted for more than one in four new vehicle loans in Q2 2012. With 25.41 percent of all new vehicle loans to customers in the nonprime, subprime and deep subprime risk tiers, loans to credit-challenged customers were up 14 percent compared to Q2 2011. In addition, new vehicle loans to credit-challenged customers now are higher than they were in Q2 2007 (24.96 percent) and Q2 2008 (24.49 percent) just prior to the financial market crisis.
However, the Q2 analysis also shows that lenders are still taking a cautious approach, keeping loan-to-value (LTV) ratios (the amount of money paid over the life of a loan versus the purchase price of the vehicle) lower than they were a year ago. For new vehicles, the average LTV ratio was 109.55 percent in Q2 2012, compared to 115.65 percent in Q2 2011.
“Despite the rise in subprime loans overall, there is still a strong sense of managing risk,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Because the overall lending environment has improved, lenders are making loans available to a wider range of customers. This is good for manufacturers and dealers, as it allows them to sell more vehicles. However, the lower loan-to-value ratios show that lenders are not willing to throw caution to the winds.”
Additionally, the Q2 report showed that the average customer credit score for new vehicle loans dropped nine points, from 762 in Q2 2011 to 753 in Q2 2012. For used vehicle loans, the average customer credit score also dropped nine points from 671 in Q2 2011 to 662 in Q2 2012.
In other findings:
- The average amount financed for a new vehicle increased $474, from $25,240 in Q2 2011 to $25,714 in Q2 2012.
- The average amount financed for a used vehicle jumped $370 from $17,063 in Q2 2011 to $17,433 in Q2 2012.
- The average monthly payment for both new and used vehicles was relatively flat, with new vehicles rising by $2, from $450 in Q2 2011 to $452 in Q2 2012. For used vehicles, monthly payments jumped $4, from $347 in Q2 2011 to $351 in Q2 2012.
Complete findings from the State of the Automotive Finance Market Q2 2012 credit trends analysis will be presented in a Webinar at 11 a.m. Pacific/1 p.m. Central/2 p.m. Eastern on Sept. 6. If you would like to register for the event, visit www.ExperianAutomotive.com.
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.
About Experian Automotive
Experian Automotive provides information services and market intelligence that enables results-driven professionals to gain the fullest possible understanding of the market, the vehicles and the people who buy them. Its North American Vehicle DatabaseSM houses data on nearly 700 million vehicles and, when combined with Experian’s credit, consumer and business information, provides an integrated perspective into the automotive marketplace. Experian Automotive’s AutoCheck® vehicle history reports provide dealers and consumers with in-depth information, allowing them to confidently understand, compare and select the right vehicles. For more information on Experian Automotive and its suite of services, visit our Website at http://www.ExperianAutomotive.com.
Experian® is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2012 was $4.5 billion. Experian employs approximately 17,000 people in 44 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and Sao Paulo, Brazil.
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