The worst of the crisis in retail automotive financing has passed. Late last year, lenders began extending more loans to car buyers -- even some with weak credit histories -- and to dealers.
Late in 2008 and for most of 2009, even customers with good credit had trouble financing a car purchase. But now auto lenders are somewhat freer with their money, dealers say.
"The average customer can get credit again," said Jim Quinlan, president of Reeder Chevrolet in Knoxville, Tenn.
Said Michael Maroone, COO at AutoNation Inc., the nation's largest dealership group: "We are seeing higher closing rates, and I really credit that to improved credit year over year." He said the lending climate began to turn around in the fourth quarter, and closing rates in turn rose slightly in December. He declined to give the company's current closing rate.
Said Anthony Pordon, senior vice president for Penske Automotive Group: "We are seeing more deals both with the captive finance lenders and the banks."
Ten of the nation's largest dealership groups representing almost 1,000 stores told Automotive News that credit standards are slightly easier for the majority of their customers.
Lenders are approving more applications for two reasons:
1. Credit markets opened up, improving lenders' liquidity.
2. Consumers are more realistic and educated. They have paid off their debt and arrive at the dealership with a down payment, so they're in a better position to get financed.
Lenders remain strict on some counts. Consumers with substandard credit or car buyers who still owe large balances on trade-ins won't get loans easily. Customers must make healthy down payments to get financed.
Finance companies often don't allow customers to count rebate cash as down payments, although GMAC Financial Services is an exception, said Chuck Simon, general manager of Dominion Auto Group, a dealership in Richmond, Va. And dealers usually can't call a finance company and persuade it to accept a customer it had initially declined.
"Rehashing deals is a lot more difficult than it ever was before," Simon said. "The computers don't let them do it."
In the third quarter of 2009, only "super prime" customers with excellent credit were getting financed easily, reports research firm Experian Automotive. Auto loan volume declined even for "prime" customers with good credit, Experian's report said.
Prime customers usually have credit scores of 680 to 730. Above 730 is super prime, while nonprime or near-prime is usually 620 to 680. Below 620 is subprime.