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More Car Loans Equals More Car Sales

Based on a report from Businessweek auto loans were up in the 2nd quarter 5.5% over the same period last year and these loans were not all from car buyers with great credit. In fact they said that nearly 44% of these auto loans were taken by buyers with risky credit. That’s good news for us that are selling cars for a living and trying to pay the bills. Even though the 2nd quarter is history as we would say in the business. The bright spot of the report is that more investors are buying securities backed by subprime auto loans. Market offerings of sub-prime debt are up nearly 51% from the same period in 2011, that’s huge. That means that more car loans will equal more car sales.

More Cars Loans Means More Car SalesFor the past 4 years or so credit has been an issue with so many of our customers. There is no question that things have gotten gradually better since it hit bottom in 2008, but the fact that investors are putting money in the market for car buyers with weak credit is great news. You may have already noticed that the lenders your dealership use are buying more car loans and deeper deals than they were in the past and based on what is going on in the market we should continue to see that happen for a while.

More Cars Sales When Your Customers Can Get Loans

Sure we have been selling cars without a problem to buyers with great credit, but they are usually the ones that have done their research and rarely let us make much gross which in turn means a smaller commission. The thought of being able to finance more prospective customers with less than desirable credit can be exactly what we need to get our car salesman income back on track.

I can’t even begin to tell you how many car salesmen and women have been complaining about working with a customer for an hour before you find out that they can buy anything because of credit. Pent up demand and the ability to sell more customers with lower credit scores is a just the ticket for selling more cars.

Later, Fresh Up on the Lot

KB

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Source: Businessweek

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3 Responses to More Car Loans Equals More Car Sales

  1. Sky November 14 at 8:53 pm #

    Nice write up ;) I’d rather work with a flexible sub primer who needs to buy than a bullet with his arms folded and chin up in the sky.

  2. KB November 14 at 6:08 pm #

    Hi Jared,

    Some valid points

    KB

  3. Jared Baudin November 14 at 5:24 pm #

    In the recession of 2008 one of the major factors in the colapse of the stock market was sub-prime loans given to first-time and high risk home buyers.
    The enitial result was great; easy access to credit created new customers, bolstered demand in the housing market; increasing property values and comissions for real estate agents.
    It was believed by some that there was no real risk in giving out these loans; after all, houses appreciate with time, not depreciate. If a high risk home owner had to go into forclosure, the bank would simply repossess the property and sell.
    As we know today, the banks forclosed on millions of home owners who could no longer afford their morgages.

    If we offer subprime loans and low downpayments to our customers with poor credit, could we not potentially see backlash?
    In the near future, if the ecconomic situation fails to improve, might there be an influx of used vehicles into the market with limited numbers of customers to buy them?
    Lastly, could this outcome increase the difficulty for new car salesmen and women to make sales?

    Thanks for all the great advice.
    Jared

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