According to Experian's State of the Automotive Finance Market Report for the first quarter of 2014, scores are divided into five
categories of ranges. 740 and up puts your score in the "Super Prime"
category. 730-680 is "Prime" and 679-620 is
"Non-Prime". That leaves all
other consumers in the "Sub-Prime" category with 550 and under being
described as "Deep Sub-Prime". According to their Open Loans by Risk
report, over 21 percent of all open loans are below prime, with deep sub-prime
lending being the highest growing category of open loans. The average credit
score of an auto financing customer dropped 10 points from the first quarter of
2013 from 731 to 721. In summary, more lenders are willing to take chances with
sub-prime borrowers as more and more consumers are falling into that category.
According to Credit-Report-101, the national average FICO credit score as of
2014 in the US is 639, which would place the average national consumer in the
That's it. The only piece of information used to determine
your lending category is your score. Your score represents the amount of risk a
lender assumes by loaning you money or goods.
More and more sub-prime borrowers are being approved for
auto loans. Reports suggest that sub-prime lending has been the single highest
growth category in lending. Experian reports that over 45% of all auto loans
went to sub-prime borrowers. Less stringent auto credit means that you may be
approved for an auto loan that you would have been denied for a year ago.
Sub-prime auto lenders don't worry market watchers as much as mortgage lenders
because auto loans are less risky in general when compared to sub-prime
mortgage lending. Car loan payments are smaller and more manageable, even for
those less likely to pay. The loans are scheduled to be re-payed over a much
shorter period of time. The value of the collateral is less susceptible to
change and is much easier to repossess and re-sell in event of default. Buyers
are much more likely to keep from having their transportation to work from
Where does this leave you? That depends. It's looking to
continue to be a buyer's market. With more consumers being affected by low
credit scores, lenders are opening up lending to those who would have not been
able to get a car loan in the past. Buyers with better credit are dwindling and
more in demand, resulting in competitive interest rates for those upper
If you find that you fall into the sub-prime category and
are looking to finance a vehicle, your local dealer is the first place to
start. While you will likely be denied financing by credit unions or private
lenders, a dealership that specializes in bad credit auto loans or Buy Here Pay
Here will be able to finance you with a down payment and few items of income
and residency verification.
At Used Car World we work primarily with consumers
struggling with credit challenges. We offer all kinds of borrowers access to
quality, affordable vehicles. We offer guaranteed approvals. Apply online and get an answer in minutes!