TransUnion recently released its fourth quarter 2009 auto delinquency report that reflects no rise in the rate of delinquencies which could be positive news for those consumers hoping to finance their next vehicle with a bad credit car loan.
Bad credit auto loan implications
At Auto Net Financial, where applicants can fill out our online bad credit car loan application and begin the process of rebuilding their credit, we see that TransUnion has released its latest report on automotive lending – this time dealing with how auto loans performed in the fourth quarter of 2009.
These auto delinquency forecasts from TransUnion, one of the three major credit bureaus, are extracted from a huge database consisting of 27 million consumer records that are randomly sampled every quarter. As such, it’s fair for us to assume that the results are relatively accurate.
According to TransUnion, the national auto loan delinquency rate showed no change between the third and fourth quarters of 2009, while the year-over-year delinquency rate actually decreased by 5.81 percent. This could be welcome news for many of our applicants who are either currently waiting for an approval or are thinking of re-applying after a previous turn-down.
TransUnion analysis
“Going against traditional seasonal patterns, the flattening of auto delinquency rates in the fourth quarter may be an optimistic sign for payment behavior over the remainder of this year,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “Since 2000, auto delinquency rates have increased in the fourth quarter except for one occasion back in 2003. In fact, at the start of the recession (fourth quarter of 2007), the auto delinquency rate increased nearly 15 percent from the prior quarter. Part of the reason why we may be seeing a gradual turnaround in delinquency rates is the impact of new lower risk loans over the past several quarters including new loans from the popular government program, Cash for Clunkers.”
TransUnion’s report shows that 18 states witnessed a decline in quarter-to-quarter delinquency rates while a total of 35 states experienced a decline on a year-over-year basis.
The Bottom Line
The good news for bad credit car loan applicants is that the drop in loan originations seems to have halted and that subprime lenders are beginning to increase the actual number of bad credit car loans they are writing.
The bad news is that while many lenders are increasing the number of loans they originate, these same lenders are continuing to apply conservative lending criteria to these loans. When comparing year over year car loan environments, this means that an individual with bad credit and a given credit score will still be subjected to historically higher interest rates with a given credit score (probably with a shorter loan term) and will be asked to put down a fairly sizeable down payment.
At Auto Net Financial, our advice to consumers seeking bad credit car loans remains the same as it has been since the beginning of the current recession:
• Know your credit score (FICO score) and what’s contained in your credit report
• Plan on coming into the loan with at least 10 percent down in cash or trade equity
• Keep the loan term as short as possible
• Buy a compact of midsize vehicle and put off looking at your dream car until after you’ve reestablished your credit.
Helping you find the right dealer
For more information about subprime car loans, go to www.autonetfinancial.com and begin the process of rebuilding your credit by filling out our secure online bad credit car loan application. If you need additional assistance, go to the “About Auto Net” tab and click on the “Contact Us” line where you will find our toll free number. Our customer service representatives are available to answer your questions during normal business hours.
