In a report earlier this year, Experian Automotive released data showing that the number of borrowers 30 days late on their car loans is down 8 percent from early 2010. Similarly, GM Financial reports that delinquencies between one and two months are down 28 percent. With mean wages still decreasing and unemployment stagnant, what is the cause of this trend?
With credit harder to come by, many car owners now consider their auto lender’s payment at the top of their priority list. A few years ago, a default and repossession of a vehicle didn’t impair the ability of someone quickly getting another vehicle with a similar payment. In 2011, however, a previous default may make it more difficult for someone to obtain a bad credit car loan.
The credit crisis we are still feeling the after effects of did have cause positive adjustments in the car loan industry. Instead of simply two buckets of customers – prime and subprime, new sub categories such as “near-prime” are being developed to properly categorize risk. Consumers who took a beating a few years ago, may now be on the road to financial responsibility and car finance companies are incorporating credit trends in their approval process instead of just raw credit scores. Though the lending is not as lax as 2006 where you could walk away from the car yesterday and buy a new one the next day, a bad credit car loan is attainable for those with healing credit histories.
For most people, having a car is mandatory to get to work. This importance is being reflected in the statistics with increasing promptness in their payments – and as a result, the car loan industry is near full strength.