Data from Equifax, TransUnion, and the Federal Reserve Bank of New York all show that subprime auto loan and lease originations are on the rise. Does your dealership have what it takes to capitalize when it comes to these borrowers with bad credit? If not, Auto Credit Express has the leads and tools your store needs to dominate your subprime market.
Subprime Auto Originations Increasing
In January of 2019, TransUnion's consumer credit forecast projected a rise in subprime car loan originations. Clearly they were onto something, as all indications are that subprime originations are climbing.
TransUnion's latest Industry Insights Report shows that the subprime segment is moving up in market share. Their data revealed that subprime borrowers (those with 600 credit scores and lower) increased auto originations by 2.4 percent from 2017 to 2018. Only the prime plus (721 to 780 credit score) and super prime (781 to 850 credit score) segments increased more in that time frame.
Meanwhile, the Federal Reserve Bank of New York released their latest Household Debt and Credit Report in May of 2019. The biggest takeaway here is that subprime borrowers – which they define as borrowers with credit scores of 620 and lower – saw the most growth in auto originations from the previous year.
The New York Fed's report showed that auto originations grew 6.3 percent in the first quarter of 2019. Subprime borrowers experienced a 13-percent increase in originations, the highest of any credit tier. Subprime loans also accounted for 21.8 percent of total outstanding car loan balances, up from 19 percent in 2018. The report did note that the biggest share of the market still belongs to prime borrowers (credit scores of 760 and up) at 35.9 percent.
Equifax's latest auto finance information also shows that subprime originations are on the rise. Their data notes that car loan originations on the whole through January of 2019 were up 0.8 percent in accounts and 2.8 percent in balances year-over-year.
Their analysts tabulated that subprime auto loan accounts (those to people with credit scores of 620 and below) increased 1.9 percent during this time frame. Through January of 2019, subprime borrowers had a car loan contract market share of 21.3 percent, up from 20.7 percent in January 2018. They also calculated that subprime contract balances increased 5.3 percent year-over-year.
Equifax told Subprime Auto Finance News that they expect subprime originations to remain strong for the rest of 2019.
Increase Subprime Car Sales at Your Dealership
Everything that's going on in the industry points to it being the right time for your dealership to step up its game in the subprime space. In addition to TransUnion, the Federal Reserve Bank of New York, and Equifax showing subprime originations on the rise, the Fed is holding off on increasing the benchmark interest rate for the time being, and quality used cars are readily available from the record number of used vehicles coming off-lease in 2019.
The Federal Reserve has increased the interest rate nine times between the end of 2015 and the end of 2018. In their latest meeting in May of this year, they opted to leave it unchanged. As it currently stands, the Fed is no longer projecting rate increases for the rest of the year, but that could change after we get their latest economic projections in June. Dealers can use this respite to get consumers financed now while rates are no longer on the rise.
Meanwhile, the number of off-lease cars coming back to dealer lots in 2019 is going to set a record. These vehicles, and others like them from past years, are going to be models subprime customers are in the market for. Subprime borrowers want used cars to keep costs lower, and these vehicles can help your store provide more options for them.
Clearly, the timing is ripe for your dealership to broaden its customer base and increase subprime sales. Auto Credit Express can help your store reach new heights with our industry-pacing subprime auto leads and other dealer products.
Subprime Auto Leads for Your Dealership
Increasing origination numbers suggest that lenders are feeling more confident in the subprime space. Dealerships would be wise to utilize the expertise of Auto Credit Express to help these bad credit borrowers.
Our special finance car leads are a cut above the rest. We've a leading originator of leads for over 20 years now, and auto dealers who use our lead fulfillment programs can increase appointments, shows, sales, and gross profits.
Get in on the action by giving us a call at 888-535-2277 or filling out our online contact form.