Auto Loans Lead Consumer Credit Recovery?

[Mar 15, 2010.]

 

Cheap Auto Loans Behind Recovery?

When the Federal Reserve published its monthly consumer credit report earlier this month, the figures suggested that things might just be beginning to return to normal. For the first time in nearly a year, Americans were confident enough in January to borrow more overall.

Credit card lending was still down, but "non-revolving credit" (which the Fed says includes "automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations") was up $6.6 billion.

And the New York Times commented:

A second consecutive month of increases in auto loans and the slowing of the decline in credit-card borrowing could be an indication that consumers are beginning to feel more confident about increasing their spending and taking on more debt. That development is seen as critical to providing support to the overall economy, which is still struggling to recover from the worst recession since the 1930s.

More Good News about Auto Loans

Lenders are unlikely to relax their stricter borrowing requirements as long as many people still have trouble paying off their existing auto loans. So there was more good news last week when research revealed that the value of delinquent accounts in the sector dropped 10 percent in the last quarter of 2009.

The research, which was published by Experian Automotive, also looked at the credit scores of those who signed up for auto loans that quarter. New vehicle customers had an average FICO score of 775, while those buying used cars had an average of 680, which was down slightly from the previous quarter.

No Credit Check Loans "Out There"

The Experian Automotive report went on to talk about the sector's subprime lending, which includes "no credit check loans." And, again, its findings were very positive. Melinda Zabritski, who is director of automotive credit for the company, commented:

While the lion's share of the new car market is being driven by prime lending, loans for subprime customers are still out there, especially in the used market, if customers and automotive retailers know where to look. Understanding which lenders have programs specific to these markets can make a big difference in getting customers with credit challenges into a vehicle.

Finding the Right Auto Loan for You

Whether you're a prime or subprime borrower--or whether you need a no credit check loan--you should arm yourself with a finance deal before you set foot on a dealer's lot. It's the best way to make sure the salesperson doesn't push you into buying the wrong sort of expensive auto loan.

You can go online to get a quote.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.