Subprime lenders grow more cautious, says Moodys

Subprime lenders grow more cautious, says Moodyês

Subprime auto lenders have become increasingly cautious in making loans to risky buyers, says a recent analysis by Moodyês. One indication of lendersê increasing caution is the improved borrower credit scores for used auto loans in fourth-quarter 2013, the first year-over-year improvement since 2010. Other evidence is slower growth in captives, banks and credit unionsê share of subprime loans.

–Declining competition from nontraditional subprime lenders puts less pressure on independent finance companies to lend to weaker borrowers to maintain their lending volumes,” says Peter McNally, Moodyês vice president and senior analyst.

Rising interest rates on subprime loans also shows that lenders are becoming more cautious. But –rising loan-to-values and loan terms suggest that lenders are still willing to take on increasing risk,” says McNally. –So we donêt anticipate a major slowdown in subprime lending.”

Download Bulletin PDF