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Subprime Originations Realize 3Q Boost, Reports Experian Automotive

December 01, 2011

SCHAUMBURG, Ill. — Auto finance sources boosted below-prime originations during the third quarter, with loans made to credit-challenged customers representing 21.87 percent of all new-vehicle loans.

The largest percentage increases in share were realized in the two highest risk segments, with deep subprime and subprime increasing their share of new-vehicle loans by 17.3 percent and 17.8 percent, respectively. Nonprime loan share jumped by 12.5 percent.

Credit scores also fell during the quarter, with the average credit score for new falling from 769 in the year-ago period to 763. For used-vehicle loans, the average fell from 683 in the third quarter of 2010 to 676.

“The automotive finance industry is continuing a steady climb to good solid footing,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Consumers continue to do a better job of repaying loans, while, at the same time, many of the most risky loans from 2007 and 2008 are now off the books. These factors combine to lower the total volume of dollars at risk and give lenders more confidence in loosening their overall lending standards.”

Delinquencies also fell during the quarter, with 30-day and 60-day delinquencies sliding by 7.05 percent and 7.4 percent, respectively. The total volume of dollars at risk, according to Experian Automotive, also fell by $2.99 billion from the year-ago quarter.

“Overall, our Q3 analysis shows very positive signs for the automotive lending industry,” said Scott Waldron, president of Experian Automotive. “With more loans being booked outside of prime, lenders are showing they are willing to be more flexible in their lending strategies. However, consumers may still have the impression that lending is extremely tight, so it is important for lenders and retailers to educate car shoppers that there are financing options available to a wider group of consumers.”

For more information, visit www.experian.com.

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