Prime customers are in the mood to shop again
|Jamie LaReau covers auto dealers for Automotive News|
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Seeing customers with lousy credit apply for auto loans is nothing new.
But when more folks with prime credit scores return to the auto market and seek loans with vigor, that's something to talk about.
According to Morgan Stanley analyst Adam Jonas, the Morgan Stanley U.S. Credit Quality index rose more than 7 percent year-over-year in March. That amounts to 27 consecutive months of increases and puts it at the highest level on record.
The rise in the index was driven by a "broad base reduction in credit losses and delinquencies on auto loans, especially for subprime auto loans," Jonas says.
Credit quality measures how well loans are performing. For example, if people are paying on time or not or if there are a lot of expensive repossessions.
A continued rise in the credit quality index is an indicator that more customers with prime credit ratings are getting back in the game, some dealers say.
Mac Haik Dodge-Chrysler-Jeep-Ram in Houston has seen the trend firsthand. New-car financing there is up 25 percent through April compared with a year ago. The bulk of that increase is in prime loans, says Nancy Lambert, general manager.
"There's always going to be people with bad credit trying to get a car loan, but the regular people are coming back now," she says. "They were holding back before, watching to see what the economy was going to do."
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