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Credit Loosening Slowly, Says CNW Market Research

March 24, 2009

BANDON, Ore. — The industry is showing signs of life, as lender thresholds for new-vehicle buyers showed signs of loosening up in February, reported CNW Research.

After reaching a high-water mark in October, the average FICO score for new-car buyers slowly dropped to 723 and change in February. Simultaneously, the share of new-car buyers with FICOs below 670 rose from 6.5 percent in October to 10.7 percent in February.

“Some of this can be put at the feet of financial institutions willing to ease back on credit requirements, and an equal amount can be attributed to those people with marginal FICO scores coming back to the market,” wrote CNW’s Art Spinella.

And despite closing ratios being down in February, CNW Research said there are other indications that the industry is coming back to life.

“It may sound weird, but the industry is showing signs of life because of closing ratios coming down,” wrote Spinella.

He pointed out that when closing ratios reached nose-bleed heights in the final quarter of 2008, a large percentage of consumers were buying cars because they were in need of a new vehicle. In contrast, many “lookers” stayed home during that period, a consumer category Spinella thinks may now be ready to buy.

“They are beginning to come alive,” wrote Spinella. “CNW’s Floor Traffic Index shows signs of life after a near-death experience throughout 2008. The trend line is barely perceptibly up, but up nonetheless.

“And with that comes the concurrent decline in closing ratios.”

Given that the average new-car shopper takes six months from initial consideration of buying a vehicle until actual acquisition, Spinella said he doesn’t expect to see solid gains before the third quarter of this year.

Comments

  1. 1. Thomas Van Kempen [ March 25, 2009 @ 05:25PM ]

    I on the other hand who run the subprime department here see just the opposite. What few subprime lenders that are left are more reluctant to approve a deal now than December. I would also dispute your assumption that the average new car buyer takes 6 months to actually purchase a new vehicle. That time frame seems unrealistic to me. I would suggest that it is much shorter

 

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