American Car Financing Market Bounces Back

Even with prices on today’s auto markets fluctuating quite a bit, new numbers are showing that more Americans than last year are taking the plunge and deciding to invest in newer transportation by financing a vehicle. Equifax, one of the three major reporters of credit, is reporting trends for auto loans in 2011 that show a revived appetite for car financing, looking at total loan origination for both new and used cars. The results show total loan amounts up over 20% from last year, when the aftershocks of the recession were still hampering the ability of families to do a variety of common financial deals like picking up a newer vehicle.

For those who are interested in how most people approach financing a new vehicle these days, some of the numbers from Equifax are enlightening. According to the company’s research, loans are up 40% for auto finance companies like GMAC and Ford Motor Credit Company, with only a 9% increase for the portion of auto loans handled through banks and credit unions. While it may be that purse-tightening by the big established bank lenders is still keeping many new customers out of the fold, it might also be that new incentives and accommodation from finance companies are bringing in more new customer traffic.

Equifax also had some data about who is getting these auto loans in 2011; according to the research, more than 80% of all observed auto loans were obtained by individuals with a credit score over 640. Anything under 640 is usually associated by lenders as extreme risk. But with so many Americans suffering from unemployment, high mortgage costs, stagnating wages and massive credit debt, the average credit score isn’t what it used to be, and lenders are going to have to get used to a new normal that means reaching out to a larger section of the overall customer base: those with lower credit scores.

For those many people who need to get past the “rejection desks” at their local dealerships, some common car financing tips will usually help “low credit” buyers get by. Think about bringing a larger down payment to lower the overall financing amount, and close the gap even more by considering a less sporty or slightly older vehicle. Look out for high interest rates attached to some shoddy loan products, and always drive the best bargain with those on the other side of the car financing equation by sticking up for your rights as a borrower. Shopping around to third party lenders and getting pre-qualified can help “bad credit car loan” borrowers to cut through the red tape and find the car that they want for a price that they can afford.