Because 2011, 82 percent of all lenders addedenhanced the Dealertrack network lend at least partly in the non-prime market. In addition to an increase in the number of loan providers, we are seeing an increase in the variety of credit application submissions per special clients, more signaling the broadened accessibility of funding supply in the market today.
Vehicle Supply and the Loaning Market
Used automobile demand has been really stable and growing as the supply of made use of automobiles remains to rise. As this supply remains to recover, loan providers are aiming to help a growing number of consumers purchase automobiles. The chance for used automobile financing remains strong.
Experian Automotive recently reported that total automotive loans continue to grow, reaching a record high of $905 billion in the first quarter of 2015, an 11.3 percent boost from the very first quarter of in 2013. In reality, vehicleloan, in basic, continue to be a modest part of the financing market compared to the $8 trillion mortgagemortgage market, which was a significant contributor to the implosion of the last subprime loan bubble a number of years earlier.
Generally, we see a fluctuation in overall subprime applications during the tax refund period. This year, despite severe weather condition in the Northeast earlier in the year and most just recently in Texas, which contributed to a small shift in the seasonal automobile finance curve, subprime applications remain constant with 2013 and 2014 numbers.
The prime and subprime markets continue to be the sections driving overall automobile finance growth. Nevertheless, prime credit financing still exceeds subprime lending in today’s market. The non-prime market is a steady part of the total automobile loan originations.
Based upon the credit applications submitted through our vehicle finance network, subprime submissions have actually remained at about 1/3 of the overall variety of credit applications that we get today, as compared to 58 percent in 2007. Likewise, Experian Automotive specified this month that subprime loans comprised just 19.7 percent of market in the first quarter – the least expensive share of the market considering that 2012.
When it comes to subprime loan approvals, they remain to climb. We have seen subprime approval rates slowly climb considering that 2010, and early 2015 results indicate higher trending approval rates for subprime than in the previous three years.
In addition, while we are seeing a boost in funding terms and amounts within the Dealertrack network, with relatively flat regular monthly payments across all loan types for the past a number of years, we are seeing no evidence of increasing “loan to automobile value” stats, which is an essential metric in figuring out the market’s capability to take in these slightly longer finance terms.
Intense Future for Automotive Financing
While today’s financing markets and consumer confidence are a lot better than in 2008, dealers and loan providers still requirehave to be alert and prudent when it concerns helping keep providing at healthy and robust levels. Based upon our experience, we anticipate that subprime financing, and vehicle lending in general, to continue to be strong for the remainder of 2015 and into 2016, specifically as made use of car supply remains to recuperate and grow.
Raj Sundaram is co-president of Dealertrack Technologies.