Deep subprime lending is finally in recovery mode.
"We have certainly seen a lot of growth; there are more loans to be had down in that area," said Melinda Zabritski, senior director of automotive credit for Experian Automotive.
Independent used-car lots and buy-here, pay-here dealerships probably account for the lion's share of deep subprime loans, analysts say. Still, new-car dealers do book deep subprime loans and also may own buy-here, pay-here stores or independent used-car lots.
"One of every three customers" has a credit score below 600. "That's not going anywhere," says Tim Tucker, who was general manager of used-car store Car Loans Express in Cincinnati until May 1 and is now special finance manager at Performance Honda in nearby Fairfield, Ohio. A credit score below 600 can put consumers in the riskier end of subprime, a category that starts at a score of 619, and even into deep subprime, a category defined as scores below 550, according to Experian's Scorex Plus scale.
Car Loans Express is the stand-alone used-car operation of new-car dealership Kings Ford in Cincinnati. Car Loans Express also has its own F&I department, which specializes in subprime financing.
Of the subprime risk tiers, deep subprime fell the most percentagewise during the recession, and it has been the slowest to recover, Experian data show. With some ups and downs, the less risky categories of subprime began to come back as early as 2010.