Subprime car loans increasing

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Car buyers with bad credit are getting increasingly bigger car loans as the economy improves.

The latest data from credit bureau TransUnion show that car buyers in the subprime credit category have seen a 6.6 percent increase in car loan balances from the first quarter of this year, compared to the same period in 2012. That increase marks an 11 percent jump of auto loan balances over the first quarter of 2011. Currently, the average auto loan balance for a consumer with subprime credit has risen $1,200 in 2013 over the same period in 2012.

Car loan balances on the whole only increased 4 percent in 2012 from the same period in 2012 and 8 percent over the last two years.

The increase in auto loan amounts should be a relief to car buyers with bad credit, but it is a bit of a concern to TransUnion analysts who noted that although delinquency rates have not increased during the last two years, there could be an economic burden on lenders if more loans become delinquent due to the increased balances.

Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.