Lenders loosening auto-loan standards

Associated Press

DETROIT

Consumers with less-than-stellar credit are getting car loans again as lenders loosen their standards, and the trend is likely to continue as more lenders get into the business.

The percentage of loans going to subprime buyers rose 8 percent in the third quarter, their first year-over-year increase since 2007, according to a report issued Tuesday by Experian, a credit-reporting agency. For new cars, the percentage of loans going to subprime buyers rose 13 percent over the July-September period in 2009. The increase for used cars was 3 percent.

The majority of loans — 63 percent — is still going to buyers with prime credit scores, which is defined as a 680 or above. But even that is settling into a more-normal pattern. Before the recession, when credit was very loose, just 51 percent of loans were going to prime buyers, according to Melinda Zabritski, director of automotive credit at Experian. Last fall, when credit was tight, 66 percent of loans went to prime buyers.

Another sign that the credit market is thawing: The loans people are getting are covering larger amounts and have longer terms. The average amount financed for new cars rose $2,530, to $25,273 over the third quarter of last year, while the average amount financed for used cars grew $977 to $16,706. The average terms rose by about a month, although the lowest-tier buyers — those with scores of 550 or less — saw their terms rise by nearly four months.