Lenders need to stay diligent

This year was full of relatively positive, consistent auto finance trends. Next year likely will follow suit, but the upswing won't last forever.

"You've got consumer credit doing well, and that's reflective of what we're seeing in the auto market," said Melinda Zabritski, senior director of automotive finance for Experian.

The average credit score for all consumers was 675 in the third quarter, up 2 points from a year earlier, according to Experian.

The average credit scores for auto borrowers improved as well. New-vehicle lease customers' average score was 722, up 4 points. New-vehicle loan borrowers' average score was 713, up 1 point. And used-vehicle loan borrowers' average credit score was 659, up 4 points, according to Experian.

Rising credit scores have been just one of the positive signs in the industry, Zabritski said.

In most of 2018, the creditworthy trend will likely be consistent, but several quarters from now, Zabritski expects subprime lending to expand again.

"It's very cyclical. You're going to have delinquencies start tapering off, and then you're going to have the market perform well. There will be an increased appetite to take risk, and the lenders will plan for that," she said. "We might see a little more growth in subprime, and then we might see risk then go up, and then they'll contract again."

Lenders will likely continue to adjust their criteria to position themselves as the market swings. But in any scenario, it's important for the industry to remember that the market fluctuates. Subprime lending may increase again, but if lenders are diligent, as they have been recently, the sky shouldn't fall anytime soon.

You can reach Hannah Lutz at hlutz@crain.com -- Follow Hannah on Twitter: @hm_lutz

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