As banks begin to restrict their lending requirements, many auto dealers are starting to look towards subprime clientele to finance auto sales leads. They, the dealers, reach out to lenders to see about coming together to allow loans to be made to individuals with otherwise bad credit, and who would be denied by a bank.
Many car loan leads can be found in this growing market, as demand skyrockets from dealers.
But who is this subprime clientele?
For those that do not know, subprime to lenders and banks means those who have a credit score of 500 to 600. The people below that, 300 to 500, are termed deep subprime. Lending to subprime individuals helps to get more people to buy more cars. This creates auto sale leads, as now more individuals have the potential to buy from dealers.
Which means that auto dealers can sell more, which is something they obviously want.
Auto sales leads are the lifeblood of the auto industry. The banks’ restrictions on who can and cannot obtain a loan worked against this lead creation, which is where the subprime lenders naturally come in.
Bad credit auto leads credit massive amounts of revenue each year. That’s the major benefit for auto dealers. Subprime financing creates $10 billion each year for the lenders and the dealers, and it’s even more popular when you consider that car loans are now over a longer duration of time.
More time means more interest on a new or used car. Lenders write loans sometimes lasting five to six years at a time. The average loan is for 66 months on a new car, and 62 months on a used.
Interest rates are also increasing, rising from 4.13% in May of 2014, to 4.25% in May of 2016. The means more potential growth for lenders and more opportunity for an auto lead generation.
Auto financing interest is a massive industry in its own right, generating $98 billion in annual revenue. That means that getting loans to people with the means, but not the credit, to purchase a vehicle helps the economy.
Subprime lending is an important aspect of the auto-industry, and as demand increases will likely grow more and more important.
If you have any questions about subprime loans and how they will help your dealership, or impact you, contact us!
