Rise in Subprime Auto Loans Not Causing Concerns

There is no question that the U.S. auto market is doing well. In fact, it is booming, with its projected rates showing that it could be back at a pre-recession sales level within the next year. However, these numbers do not reflect the state of the entire economy. Subprime auto financing is on the rise. It is a mere 1% lower than it was in 2008, even as the average prime-lending credit score is almost back to the same levels it was at that point. Despite it becoming increasingly easy to get an auto loan, the demand from subprime clients is simultaneously on the rise, making up more of the lending pool than experts would like to see.

Although vehicle repossession was 17% higher in the first quarter than it was last year, analysts aren’t overly concerned about the speculation that the auto industry could follow in the shaky footsteps of the housing market.

“During the economic downturn we saw that people were more willing to foreclose on their houses than default on their auto loans, because they’re saying ‘I gotta to drive to work,’” Eric Lyman, specialist in auto resale valuation and information provider at TrueCar Inc., told IBTimes.

Lyman credits the urban sprawl with causing people to live farther away from their work. This combined with the tight market for used cars, is causing a lack of concern about the rise in the subprime lending. At least among some.