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post #1 of 3 (permalink) Old 12-18-2012, 12:14 PM Thread Starter
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Subprime financing on the rise in new car sales, leasing too...

Filed under: Car Buying, Chevrolet, Ford, Mitsubishi, Toyota, Volvo, Earnings/Financials

We all remember the financial crisis that began several years back. At its core was a splurge of subprime lending for housing loans. The housing bubble burst, triggering a collapse of the mortgage-backed securities market. Apparently, those types of loans still exist in the automotive industry, and the market share for these types of "nonprime, subprime, and deep subprime," loans has grown 13.6 percent compared to the third quarter a year ago.

According to an Automotive News report, high-risk lending expanded to 24.8 percent of total loans in Q3, up from 21.9 percent for this time last year. As this level increased, average credit scores of borrowers dropped to 755, down from 763 a year ago. In that time, the average financing amount increased $90 per vehicle, to $25,963.

At 818, Volvo maintains the highest per-owner credit score, while Mitsubishi has the lowest, at 694. The highest rate of borrowers was at Toyota, with 14 percent of the market, followed by Ford with 13.1 percent and Chevrolet at 11.1.

Part of the growth in lending is the willingness to offer longer-term loans. Dealerships are starting to offer 60, 72 and 84 month borrowing periods. Carmakers are reluctant to do so, as it takes the customer off the market too long, yet the seven-year loan period is the fastest-growing category in automotive borrowing.

It all points to an industry that is eager to maintain the wave of recovery even at the risk of potentially aggressive lending practices.Subprime financing on the rise in new car sales, leasing too originally appeared on Autoblog on Fri, 07 Dec 2012 08:44:00 EST. Please see our terms for use of feeds.

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post #2 of 3 (permalink) Old 12-18-2012, 03:51 PM
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Thanks for posting this Im sure some stocks will soar before they bust I hope I can sell before the bust at the top of the inflated bubble. Buy low sell high simple enough right?

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post #3 of 3 (permalink) Old 12-18-2012, 05:34 PM
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Originally Posted by Splattered View Post
Thanks for posting this Im sure some stocks will soar before they bust I hope I can sell before the bust at the top of the inflated bubble. Buy low sell high simple enough right?
I wish I could buy stocks in "punctuation." They seem scarce in this sentence.

In all seriousness, this article did pique a question for me.
Q: How many vehicles are purchased outright vs. financed?

According to this article, its:
70.5% finance
18.5% lease
11% purchase outright

Q2: I wonder how this number changes across manufacturers?

I couldn't find any data here but I'm willing to bet, based on my belief that america is a showy society, that luxury makes are financed at a far higher percentage than say, non-luxury makes. In addition, I'm willing to bet that budget makes (KIA vs Hyundai, Scion vs Toyota, etc) are financed more than non-luxury makes.


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