Subprime New-Car Sales Fall As Industry Refocuses on Prime Credit
New-vehicle sales were flat among the high-credit borrowers in the first two months of the year, while subprime scores dropped 9%, according to a J.D. Power report.
Those sales rebounded a bit later in the quarter as subprime new-vehicle sales ended up 40 basis points lower year over year, dropping to 9.5% of total sales in the first quarter. By comparison, more loans are going to prime and superprime credit, which rose 30 basis points and 130 basis points year over year in the first quarter, respectively.
Following historic gains in 2016, auto sales have been on a decline over the past year, with predictions that 2018 will continue the downward trend. Finance companies began to tighten their standards for subprime borrowers in 2017 and the combination of a rising interest rate environment is pushing subprime borrowers out of the new-vehicle space, Bloomberg reports
Looking at an expanded nonprime bucket, fourth quarter 2017 loans fell to a record low, Experian reported. New vehicle loans and leases to nonprime consumers fell to 19.64% of total outstandings, compared with 19.77% during the same period the year prior.
The drop in subprime borrowers comes after several banks such as Ally Financial Inc. and BMO Harris told Auto Finance News that they were refocusing attention on the space.
