No matter what your credit rating is, it's likely you'll have an easier time getting an auto loan this year than in 2010, according to a study by CNW Marketing Research, an auto industry research firm based in Bandon, Ore. CNW found auto loan approval rates have risen substantially for all categories of borrowers since April of 2010:
All credit categories are seeing higher new-vehicle loan approvals vs. a year ago, with subprime up a staggering 92 percent. Granted, that increase is based on a low rate last year, but it shows just how much looser credit has become.
Both prime and near-prime also saw significant increases with nearly 90 percent of prime customers getting a positive result. That's the highest in more than five years.
Near-prime applications are similarly registering a high-water mark with 70 percent getting approved.
If you've been holding off on buying a car or refinancing your auto loan because of credit concerns, that's great news.
But I'd be remiss if I didn't point out that tight credit in the auto market, while being a pain for car buyers and manufacturers alike, was also something of a needed corrective after the excesses of the mid-aughts. Prior to the financial crisis, auto dealerships and auto lenders approved a lot of loans they shouldn't have. When the proverbial doo-doo hit the fan, the auto loan delinquency rate surged, rising 17 percent in the third quarter of 2008 alone, according to data from TransUnion.
It's always important to remember that auto lenders and dealers are looking first and foremost to sell cars, and just because a loan gets approved doesn't necessarily mean a borrower can really afford it. Cars are a depreciating asset, and extending oneself to borrow big for one is not often in one's best interest.
What do you think? Is the increase in the rate of loan approvals a good thing or a bad thing? Does easier credit make people more likely to overextend themselves on auto loans?