U.S. lenders are lowering their standards for auto loans, with average credit scores for new car borrowers falling to the lowest level since late 2008, according to a credit bureau report released on Thursday (May 26).
Reuters reported that lenders are loosening up because few existing borrowers are falling behind on payments, said Melinda Zabritski, director of automotive credit at British credit information firm Experian .
The average credit score for new car loans fell 10 points in the first quarter to 766, the same level as the fourth quarter of 2008, according to Experian.
Lenders are extending credit to more subprime borrowers, which is pulling the average credit score down. Subprime borrowers made up 41.9% of borrowers for loans on new and used cars in the quarter, up from 40.7% a year earlier. Subprime borrowers have scores below 680.
Thirty-day delinquency rates fell to 2.52%, the lowest level since the fourth quarter of 2008.
“As the automotive credit market continues to stabilize, lenders are showing a higher tolerance for risk,” Zabritski said.
The amount of loans 30 or 60 days delinquent fell $3.3 billion from a year ago to $16 billion.
Lenders in the quarter gave borrowers an extra month on average to repay their loans compared with a year earlier. The average term reached 63 months for new cars and 58 months for used cars, Experian said.
The top two U.S. auto lenders were Ally Financial, with a 9.4% market share, and Wells Fargo & Co, with 6.1%, according to the report.