on car payments?
Lenders are also making more loans to buyers
with subprime credit, but the level of repossessions
has not increased.
In 2006 about 9 percent of new
car buyers had FICO credit scores of 620 or
below (usually considered subprime), up 3
percent from the previous year, according
to the report.
"They want to move iron," Nerad says. "They want to sell cars. One of the ways to sell cars is to lessen your lending requirements."
Elmendorf agrees. "To have
growth, you have to stretch your lending requirements,"
he says. But "the auto industry has avoided
the subprime problems so far," he says.
Repossession rates "haven't
changed for some time," says Spinella.
Research shows that people will stop making
house payments and credit card payments before
they'd stop making the car note, he says.
You can check up-to-date
interest rates on new and used car loans
on Bankrate's Auto homepage.
"Car payments were the
last to go," Spinella says.
Prices up or down?
The bankers study also found that buyers were spending about $200 less. In 2005 the average purchase price was $23,500. In 2006, (the latest numbers used for this June 2007 study), it was $23,300.
But other industry measures
show transaction prices on cars increasing
slightly. For 2006 the average buyer paid
$26,740 for a vehicle, according to statistics
from J.D. Power. In 2007 the price climbs
At the same time, it's "a favorable environment for consumers because of the intense competition," says Libby.
Leasing, which is especially popular with consumers who want to drive more car than they might be able to buy, is either stabilizing or dropping, according to recent data.
The actual number of leases is down, according to the bankers study.
"Leasing, in recent years, has been marked by subsidies by the manufacturers," says Elmendorf. Those subsidies meant that buyers drive more car for the money.
These days, "fewer banks are promoting leasing and the manufacturers are not stressing leasing with their subsidies," he says. The study shows a 21 percent drop from last year, as reported by lenders. But Elmendorf cautions the sample study on leasing is about half the size of that for the rest of the survey. Another industry measure predicts that leasing is fairly level.
Statistics from J.D. Power show
that 20 percent of buyers in 2006 chose to
lease. In 2007 that figure was up to almost
21 percent. "We show leasing relatively
stable around 20 percent," says Libby.
When it comes to buying a car,
consumers have a lot of power -- if they elect
to use it. "They need to shop for financing
as well as they shop for the vehicle itself,"
he says. About 54 percent of buyers finance
through the dealer, while 25 percent pay cash
or use a loan from a bank, credit union or
other source, according to statistics from
J.D. Power. The remaining 21 percent lease.
"Overall there's a lot
of debt," says Elmendorf. "And if
you add that to credit card debt, and home
equity debt, consumers are pretty tightly
leveraged these days."