Knowledge Centre

USA – Sub-Prime Automotive Finance Market Update 2015


28 May 2015

When the financial crisis took hold, the auto finance sector was widely viewed as having veered out of control, with lenders loosening underwriting requirements and extending loans and leases to heavily stretched consumers with poor credit ratings who were in trouble as soon as the recession started to bite.

As delinquencies and repossessions mounted and residual values tumbled, so this kind of sub-prime lending came under severe pressure.

As a result, for the past six years, the only buyers able to access auto finance readily have been those with the highest credit scores and unblemished repayment records.

But since early 2014, this has begun to change. US employment prospects have been improving for some time, and the rise in jobs has prompted an increase in people looking for a vehicle in order to travel
to work. Liquidity is also starting to come back into the funding markets, so lenders are looking to expand market share and offering finance to consumers with lower credit ratings is one way of doing so.