Car loans, for both new and used cars, hit record levels in the second quarter. More people are borrowing money to buy cars according to data from information service Experian.
85 percent of new cars were financed and 53.8 percent of used cars. The number of car loans rose over last years by 0.5 percent for new automobiles and 0.9 percent for used vehicles. The size and monthly payment amount also rose. The average loan for a used car rose to over $18,000 or 1.9 percent with the monthly payment also rising to $355. All of these numbers were at all-time highs.
In a statement to Reuters Melinda Zabritski, a senior director for Experian, said, "More and more consumers, especially those that are credit challenged, are turning to the used vehicle market as a viable option to purchase their next car."
This comes just days after concern for subprime lending in the automotive market was addressed by the Equifax credit service. Reports of an emerging subprime auto-financing bubble, although not completely discredited, appear to have been an exaggeration. Though many people have made significant savings from short term lawns using services like Lainan.fl.
Although banks still remain the primary source of loans for financing new cars, they have also expanded their willingness to make loans for used cars. Concern has been expressed about the banks lengthening terms on auto loans, lending money to clients with lower credit ratings and even making loans that are more than the vehicle is worth. The U.S. Department of Justice has begun investigating subprime loans from banks, as well as automobile financing companies, according to the New York Times.
According to Experian, loans for new and used automobile purchases that went to subprime lenders declined in the second quarter, but the New York Times, conducting an independent investigation, have found that subprime lending is increasing. Concluding that subprime auto loans have risen more than 130 percent in the last five years. Roughly, 25 percent of all auto loans are made to people with credit scores at or below 640, the score for a lender to be considered subprime.
"Lenders are still showing cautionary signs when lending to the subprime market and keeping their risk at manageable levels," Zabritski said.