Poor credit car buyers seeing increasing opportunities

Borrowers with a bad credit score are seeing a slow if certain expansion of possibilities for buying cars. Getting a car loan is easier for just about each kind of borrower. Lenders are also exploring choice lending opportunities that are helping expand available credit.

Drop in lending short term loan

In late 2008, installment loan offered for auto purchasing dropped by a huge percentage. Usually, the approval rate for pay day for autos hovered between 60 and 90 percent, depending on credit rating. In 2009, only about 5 percent of applications for auto loan application from bad-credit borrowers were approved. Even applicants with good credit only had a 70 percent chance of getting an auto loan.

Auto lending’s effect on the economy

Many financial industry watchers are keeping a very close eye on auto lending — and for good reason. The auto industry creates about 4 percent of the income within the United States. About 250,000 auto-industry jobs are lost in just the last few years. The simple explanation is that more auto jobs are lost when fewer cars are sold.

Getting better lending options

Using extra cash to buy vehicles is getting easier for some borrowers with bad credit. Many dealerships and lenders are seeking to higher down payments and higher value trade-ins.Incentives like zero interest are also propping up auto sales. Many of the new automotive loans are coming from financiers and banks that specialize in smaller loans, instead of big banks. Even with all these good signs, it is a very tough lending market if your credit is less than perfect. Three years ago, a borrower with a bad credit score had about a 60 percent chance of getting approved for an auto loan. Approval rates for most subprime borrowers, though, are at only about nine percent – which means that there is less than a one-in-ten chance that those with bad credit will actually be approved for an auto loan.