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News Link • Economy - Economics USA

US Auto Lenders Get Back Into The Subprime Business

• http://www.businessinsider.com, David Henry
 Subprime, or less qualified, borrowers received 25.41 percent of all loans on new vehicles in the three months through the end of June, up from 22.29 percent in the same period a year ago and more than the 24.96 percent at the start of the financial crisis in 2007, Experian Plc'sauto finance research unit said in a report released Tuesday morning.

The report also found lenders more aggressively making loans to subprime borrowers of used cars. Subprime borrowers received 56.46 percent of loans on used cars in the quarter, up from 52.70 percent a year earlier.

Banks and other lenders are under pressure to make up for profits lost to shrunken loan portfolios and low interest rates that persist five years after the financial crisis began.

Outstanding auto loans amounted to $682 billion at the end of the second quarter, still less the $701 billion in 2007, despite the easing of standards. The balance, however, was up about 5 percent from a year earlier.

Experian uses a proprietary scale to score the credit history of borrowers and determine which are prime and which are subprime.

Melinda Zabritski, director of automotive credit for Experian, said lenders are showing caution, however, on another key front: how much they lend against the value of new vehicles. The average loan-to-value on new cars was 109.55 percent, down 0.61 percentage points from a year earlier.

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