Subprime auto lending should continue to grow in 2012. But the big percentage gains that several major subprime lenders saw in 2011 aren't likely to be repeated, and that suggests competition in the segment will intensify.
It could be good news for dealers if lenders are competing harder for their business. Dealers have fretted as the comeback in subprime has lagged behind the comeback in overall auto sales.
"We're approaching where we were in the 2008 prerecession time period," Melinda Zabritski, director of automotive credit for Experian Automotive, said in a recent interview.
In the third quarter of 2011, the last period for which detailed statistics are available, subprime auto loans made up 39.9 percent of originations, according to Experian Automotive. That was about 3.2 percentage points higher than a year earlier and just about even with the third quarter of 2008, when subprime was at 40.2 percent.
Subprime accounted for 43.4 percent of originations in the third quarter of 2007. That fell to only 34 percent in the third quarter of 2009, Experian Automotive says.
Rebounding has helped drive big percentage increases in subprime.
Used-car originations almost doubled for Ally Financial in the United States in the third quarter, to $2.3 billion, up from $1.2 billion a year earlier. Those include prime and subprime borrowers.
At GM Financial, third-quarter loan originations were up 41.6 percent from the year-ago quarter, to about $1.4 billion. GM bought the former AmeriCredit in 2010 to create an in-house source that specialized in subprime loans and a leasing source for both prime and subprime customers.
With close to 12,000 new- and used-car dealerships as of Sept. 30, 2011, GM Financial had almost 2,700 more dealerships than it did a year ago and three times as many dealerships as it had in June 2009.
Kyle Birch, executive vice president of dealer services for GM Financial, said GM Financial probably won't add many dealerships in 2012: "We're pretty set." He also said the outlook for 2012 is positive: "The cost of funds is good. Access to capital is good and expanding."
Growth already has flattened out for subprime specialist Santander Consumer USA, which more than doubled in size from 2009 to 2010, largely though acquisitions.
Santander had $14.8 billion in loans outstanding at the end of 2010. That was up from $6.9 billion a year earlier. As of Sept. 30, 2011, however, it still had $14.8 billion outstanding. That was down from $15.4 billion a year earlier, according to a company report.
According to Experian Automotive, interest rates already have ticked down in all risk categories to an average of 8.6 percent for used cars in the third quarter, down from 8.8 percent a year earlier, and to about 4.6 percent for new cars, down from 5 percent.
Said Zabritski: "It's going to be more competitive."