Subprime Borrowing is Hot in the Car Business

CAR KEYS - SUBPRIME LENDINGToday, people are able to buy new cars even with a credit score lower than 500. A year ago that would have been very difficult to pull off. Dealerships all over the country are offering deals for high credit risk buyers as long as they have a good job, current utility bills that are in good standing, and some money for a down payment.
The market for subprime borrowing is hot and this time the car business is leading the way. The central bank’s stimulus is making it easier for people with spotty credit to buy cars as investors purchase riskier bonds linked to auto loans. Below are some interesting facts surrounding subprime lending:

  • Subprime car buyers account for more than 27% of loans for new vehicles, compared to 25% last year and 18% in 2009.
  • Issuance of bonds linked to subprime auto loans soared to $17.2 billion this year, more than double the amount sold during the same period in 2010.
  • Some experts believe that vehicle loans are safer because the underlying asset can be more accurately valued, it’s easier to repossess, and people who need a car to get to work make that payment a priority.
  • 58% of loans taken out to purchase Chrysler’s Dodge brand vehicles in October were with loans above the industry average of 4.2% annual percentage rate, according to Edmunds, a researcher that tracks vehicle sales.
  • Buyers with imperfect credit account for 27% of loans for new vehicles.

*Synopsis of an article published by The Toledo Blade at

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