Expect Growth in Subprime Market This Year

By Nick Zulovich, Editor
January 04, 2013

SANTA MONICA, Calif. — When Edmunds.com considered the Top 10 trends expected for 2013, an even higher increase in auto loans to subprime consumers made the list.

Senior analyst Jessica Caldwell stated several times during a conference call on Thursday that the subprime market is an area of growth.

“Looking back at what’s been able to drive the industry, expansion of the credit profile for different types of consumers has certainly helped,” Caldwell said. “I think that will be another driver going into 2013. Especially since this credit is cheap, people are not paying as high an interest rate as they once did. That makes their purchases a lot more affordable to them.”

Recent data shows the New Year began with subprime market momentum.

Experian Automotive’s Q3 State of the Automotive Finance Market Analysis showed an even higher majority of used-vehicle buyers fell into subprime credit tiers.

The report indicated the total subprime financing market for used vehicles in the third quarter increased 5.47 percent year-over-year to 54.43 percent, up from 51.60 percent in the same period last year.

Experian’s analysis also determined that loans financed for new vehicles to customers with nonprime, subprime or deep subprime credit ratings increased to 24.84 percent in the third quarter, climbing from 21.87 percent a year earlier.

Caldwell thinks that trend should continue even though the U.S. economy is still facing some headwinds.

“Despite any uncertainty that lives out there, people still have to buy cars,” Caldwell said. “We’re seeing that through all of these things that seem fairly scary and negative, the Euro zone crisis, the debt ceiling, the fiscal cliff; people still have to buy cars.”

Article: http://subprimenews.com/spn/news/print_story.html?id=2719

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