LAS VEGAS -- There are customers with subprime credit scores, deep subprime scores and those with no credit scores at all. Guess where the growth is?
For the first time on record, consumers without credit scores now account for more of the new- and used-vehicle markets than do consumers with credit scores traditionally considered deep subprime, Greg Goebel, founder and CEO of DealerStrong, said last week at the Industry Summit, an annual F&I conference here.
In addition, vehicle sales to consumers with no scores surged 20 percent in August from year-earlier levels, faster than those in any other subprime category.
“Over the last two years, we’ve seen quite a surge” in vehicle buyers with no credit scores, Goebel told Automotive News after his presentation. “It’s playing out among credit unions, and captives that are trying to move the metal, and independents like Santander that are getting aggressive” in the deep subprime segments.
Both new, used
Consumers with no credit scores accounted for 2.9 percent of the new-vehicle market vs. 2.0 percent for those with credit scores of 100 though 520, Goebel said, citing DealerStrong data on special financing, or subprime lending, over 16 months through August.
In the used-vehicle market, consumers with no credit scores accounted for 8.7 percent of the market in the same period vs. 7.5 percent for those with credit scores of 100 though 520, Goebel said.
Consumers with no credit scores consist of those whom Goebel called credit ghosts, individuals who have no prior credit history, as well as consumers who have gone through bankruptcy and had their previous credit history erased. Although rising vehicle sales to millennials, many of whom have little or no credit history, have contributed to the increase in the no-score segment, Goebel said the segment’s gains are “coming from a whole array of sources.”
DealerStrong’s data was drawn from more than 1.5 million vehicle transactions at more than 800 dealerships, as tracked by ProMax Unlimited.