Cars Blog

Finance Blogs » Cars » Subprime auto loans still rare

Subprime auto loans still rare

By Claes Bell · Bankrate.com
Wednesday, January 19, 2011
Posted: 5 pm ET

Nearly two years after the financial crisis of 2008-2009, life is still tough for car buyers with bad credit. According to a report by CNW Research, lending to car buyers with a credit score below 640 dropped from $51.37 billion in 2007 to just $8.99 billion last year. For those keeping score at home, that's a tumble of more than 80 percent.

More crazy numbers from CNW to contemplate: In 2006, lenders approved an astounding 41.4 percent of auto loan applications for applicants with a score under 619; by December of 2008, that number had dropped to 4.2 percent. Think about that for a second: For every 20 applicants, only one was approved; the other 19 walked away empty-handed.

When you consider that in 2006, about a third of all car buyers had subprime credit, it's no wonder auto sales tanked when virtually none of those customers could get a loan in 2008 and 2009 at any interest rate.

These numbers reinforce the notion that if you're looking to get an auto loan and your credit score is under 640, the first step has got to be working on raising your credit score. There's just no guarantee subprime lending is going to come back to pre-recession levels anytime soon, according to CNW:

There is no doubt subprime lending will return to some modest levels, but certainly nothing like seen prior to 2008; perhaps as much as 20 percent (of all auto loans) within the next three years.

What do you think? Is this unnecessarily tough on borrowers with bad credit, or is this just banks learning from their bubble-era mistakes?

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
5 Comments
matt F.
January 20, 2011 at 2:04 am

You don't need credit when you pay with train riding cash.

Meagan
January 19, 2011 at 8:08 pm

I think it is unnecessarily tough on lenders with subprime scores. I wonder how many more people have subprime credit scores now compared to 2006. The economic hardships faced by many people forced hard choices, including sacrificing credit scores in order to stay afloat. It is going to be hard for the overall American economy to improve if banks do not lend money.