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When will subprime season peak?

Jim Henry is a special correspondent for Automotive News

Here's a possible wet blanket on the comeback in subprime loans, at least in the short run: The peak season for subprime loans -- and the boost they give to used-car sales -- is usually over once tax-return season ends.

Data from Experian Automotive show this effect for the past few years. In 2009-2012, the first quarter saw the lowest average credit score for approved subprime loans for the year. That could be because the riskiest customers got loans in anticipation of tax refunds.

Last year, the first-quarter average credit score on a used-vehicle loan was 663. Experian Automotive considers that to be at the high end of the subprime range, also known as nonprime — that is, between 620 and 679.

This year, the average credit score on a used-car loan was 659 in the first quarter.

That the average first-quarter score was a few points lower this year suggests that credit is looser because lenders are buying deeper. If the score were higher -- as scores were in the first quarters of 2009, at 661, and 2010, at 665 -- it would indicate that credit is tightening.

So maybe this year, subprime season hasn't peaked yet. With somewhat looser standards and keener competition in subprime, there are bound to be at least some additional car buyers at the risky end of subprime who can swing a loan, even without a tax refund.

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