Auto lenders hit the brakes on loans to customers with subprime and deep subprime credit in the second quarter of 2014, according to data from Experian Automotive.
Loans to customers with subprime and deep subprime credit -- defined as credit scores below 620 -- accounted for 15.1 percent of new-vehicle loans for the quarter, down substantially from 22.1 percent a year earlier, the company said.
Loans to customers with subprime and deep subprime credit for used vehicles accounted for 40.2 percent of the used total, down from 50.6 percent in the second quarter of 2013.
Experian Automotive defines the prime-risk credit category as credit scores of 680 and up. Within that category, Experian breaks out a subcategory it calls superprime (740 and up). Experian splits the overall subprime credit category -- credit scores of 679 and below -- into three subcategories: nonprime, subprime and deep subprime.
Loan amounts shrink
Besides loan volume decreasing, average new- and used-vehicle loan amounts to the subprime and deep subprime subcategories were smaller. Loans to customers with nonprime credit were an exception to the rule, increasing from the same quarter a year ago.
The average new-vehicle loan amount to borrowers in the subprime subcategory (credit scores of 550 to 619) was $27,347, down $216 from the year-earlier quarter. Average new-vehicle loans in deep subprime (below 550) were down $650 to $24,836. Average new-vehicle loans in nonprime (620 to 679) were $29,170, up $1,013 from a year ago.
For used vehicles, the average loan in the subprime subcategory was $16,546, down $474. Deep subprime was $14,358, down $755. The average nonprime loan was $18,756, up $83.
Melinda Zabritski, senior director of automotive finance for Experian, said in a written statement today that lenders are cutting down on risk.
“Although we’ve seen relative stability in the automotive industry the past several years,” she said, “lenders are still showing cautionary signs when lending to the subprime market and keeping their risk at manageable levels.”