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Is Subprime Lending Fueling the Auto Surge?
July 12, 2012
New research shows that lenders are loosening their standards for auto loans for people with damaged credit, but this is better news for lenders than it is for borrowers — or auto companies.
In a quarterly study, credit scoring company FICO found that just over half of lenders say the biggest increase in subprime lending will be for car loans, a jump that comes as the new-car market regains its bearings and picks up steam again. Last month, new cars were selling at an annualized rate of 14 million, up 22% from last year. For the auto industry, Automobile Magazine declared the month of June, “certainly its best since the halcyon days of 2007.” Lower gas prices probably contributed to this surge, but so did lots of rebates and incentives, frequently in the form of ultra-low or interest-free financing offers.
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