Subprime lending could boost auto sales

Subprime lending could boost auto salesWith car sales expected to be sluggish in the month of May, automakers are going to be looking at ways to increase sales throughout the summer. According to Matthew DeBord of BNET, the first place they should look is bad credit auto loans.

After the recession took its toll on the country's economy, many people looked for someone to blame. Truthfully, much of the fault was laid at the feet of the subprime real estate market. Shady practices led to big loans for people with bad credit, and when those mortgages couldn't ultimately be repaid, it sent the economy into a tailspin.

Unfortunately, this hurt the auto industry as well. Lenders who previously allowed subprime borrowers to take on loans decided to play it safe and only offer deals to those with sterling credit. The ensuing drop-off in car sales can't be completely attributed to this development, but denying people car loans certainly didn't help.

According to DeBord, the auto industry needs to loosen up with these restrictions. There are signs that they already have, but allowing drivers with bad credit to apply for and receive car loans would go a long way toward boosting sales for the summer.

Many Americans who didn't have credit problems in the past saw their scores damaged in the recession, sometimes through no fault of their own. A recent A.T. Kearney study suggested that these borrowers may not be the credit risk that their score indicates, creating an opportunity for lenders willing to offer loans.