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Subprime Fell to Lowest Share Since 2011 in April

An Equifax review of auto finance data from the first four months of 2019 found subprime’s percentage of total originations fell to 22.7% for all purchases and 9.2% of new-vehicle leases.

September 12, 2019
Subprime Fell to Lowest Share Since 2011 in April

Auto finance sources appear to be tightening their lending standards for sub-620 car buyers and lessees.

Photo by Albuquerque Film Office via Flickr

2 min to read


ATLANTA — Equifax analysts say fewer subprime loans for greater amounts drove the category’s share of the U.S. auto finance market down to 22.7%, a 1.7% year-over-year decrease, while that category’s share of all outstanding balances held steady at 18.3%.

In a release, the bureau reported 7.96 million auto loans totaling $183.9 billion originated from January to April. This is a 0.3% decrease in accounts and a 2.3% increase in balances over the first four months of 2018.

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Read: Rising Loan Amounts Drive Consumers to the Used-Vehicle Market

Of those, 1.81 million originations went to consumers with a VantageScore 3.0 credit score below 620, a 1.8% decrease from April 2018. These newly issued loans have a corresponding total balance of $33.6 billion, a 1.8% increase.

“It appears lenders are tightening up in the under-620 credit score bucket for both lease and retail contracts.”

The average origination loan amount for all auto loans issued in April was $23,659. This is a 4.5% increase over April 2018. The average subprime loan amount was $19,304, which is a 6.1% increase compared to April 2018.

Total lease originations fell by 3.4% compared with the first four months of 2018. Only 9.2% of leases were written for sub-620 borrowers.

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“While overall auto sales have fallen slightly compared to the previous year, we’re seeing active and interesting trends in auto loan originations through April,” said Jennifer Reid, Equifax’s vice president of Automotive Marketing and Strategy. “In particular, while subprime activity continues to grab headlines, it is interesting that the percent of subprime to the total originations are at the lowest level dating back to the end of the recession. Furthermore, we will keep a watchful eye on lender activity, as it appears lenders are tightening up in the under-620 credit score bucket for both lease and retail contracts.”

Read: AFSA 2019: We See Some Weakness

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