- The average credit score of buyers who finance new cars is decreasing
- Interest rates are also declining, while loan terms are rising
- Car shoppers are spending more when financing their vehicles
Car shoppers interested in financing their next vehicle may find it just as easy to get a loan now as it was before the recession. That’s the latest from credit information firm Experian, which recently announced that the average credit score required to finance a new or used vehicle has dropped to within a few points of pre-recession levels.
According to Experian’s quarterly automotive credit analysis, the average credit score for a buyer who financed a new vehicle during the first quarter of 2012 was 760. That’s a six-point drop from the fourth quarter of 2011 and just seven points higher than the first quarter of 2008, before the recession had gathered steam, when credit was easier to come by. For car shoppers interested in financing a used vehicle, the average credit score last quarter was 659, a four-point drop from the fourth quarter of 2011 and only six points higher than the pre-recession first quarter of 2008.
In addition to providing loans to buyers with increasingly lower credit scores, lenders are also financing vehicles over longer terms. In the first quarter of 2012, the average loan term increased by a month for both new and used vehicles, to 64 months for new and 59 months for used vehicles. Interest rates also declined sharply compared with the fourth quarter of 2011, averaging 4.56 percent on new vehicles and 9.02 percent for used cars during the first quarter.
"Our report shows automotive lending is as healthy as it’s been since the market bottomed out in 2008," said Melinda Zabritski, Experian’s director of automotive credit. "With consumers doing a good job of paying back loans on time and the percentage of dollars at risk reaching its lowest point in six years, lenders are able to extend terms and provide lower rates."
But it’s not just lenders who are loosening up when it comes to car loans. According to Experian, the average amount financed on new vehicles rose by $589 during the first quarter of 2012, reaching $25,995. Used cars also saw a boost, with the average buyer financing $17,050, an increase of $411 compared with the fourth quarter of 2011. While those numbers show that both new and used cars are getting more expensive, they also prove that buyers are spending more money-another important sign of economic recovery.
Experian also highlighted several other facts that indicate an improving economy, noting that first-quarter automotive repossession rates are down more than 37 percent and 60-day delinquencies dropped by more than 12 percent compared with the fourth quarter of 2011.
What it means to you: As the economy improves, an increasing number of car shoppers are finding it possible to get a loan.