We have all seen that one of the main causes of the recession of 2008/2009 was the explosion of sub-prime lending for homes, and those armies of unqualified home buyers defaulting on their mortgages. In the wake of that, when lenders panicked about the creditworthiness of their loan customers, they cut off the spigot of sub-prime loans. This, in turn, caused auto-sales to shrivel up as masses of potential buyers were suddenly deemed to be unqualified for loans.
Fast forward to 2012, and sub-prime lending is back, perhaps to levels not seen since the heyday of 2007. According to data reviewed by Edmunds.com (we can’t find the direct link to it), sub-prime lending’s comeback is what is fueling Chrysler’s current streak of 26 months of consecutive sales gains. Their data shows that 29 percent of all Chrysler new-vehicle loans were to customers with FICO scores of 680 or less. (The definition of a ‘subprime borrower’ appears to vary between scores of 640 and 680, but is more precisely an individual who does not qualify for prime-rate lending, whatever their score is.)
When Edmunds looked at which models have the largest percentage of their loans with interest rates exceeding 10 percent, the list of cars was practically a who’s who of cheap new cars that seem to be more popular with poor people those of a lower socioeconomic stature (no offense meant to those who own the cars on the list, of course). The stats:
Mitsubishi Galant, 43%
Suzuki SX4, 41%
Dodge Avenger, 39%
Kia Forte, 37%
Dodge Caliber, 36%
Nissan Sentra, 26%
Chrysler 200, 24%
Dodge Journey, 21%
Nissan Versa, 21%
Chevrolet Sonic, 20%
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