Current Lender Health

I haven’t contributed to my blog for a while, since the financing industry has been turned on it’s ear over the past several months.  Everything that has been written so far still applies and has a positive effect on your credit rating, unfortunately most banks have raised there criteria for loan approvals.

I will try to give you some insight into what is currently happening by giving you a basic breakdown of lenders.  To start with you have prime and sub-prime lenders, a prime lender will generally have a cutoff around a 600 to 620 Beacon score.    When it comes to sub-prime there are two tiers, the upper level sub-prime that cater to the 500 to 600 Beacon score and the lower level sub-prime that picks up those below a 500 Beacon score.  Since I haven’t mentioned this before, a Beacon score is how a lot of banks determine the rate a consumer will qualify and is based on past credit, the higher the score the lower the rate, the lower the score the higher the rate goes.

The major change we have seen lately is in the upper level sub-prime market, a majority of these lenders have either gone under or have stopped lending to this clientele completely, leaving a major void in the sub-prime lending market.  The other change we have seen is in the lower end sub-prime market, with the higher than normal default rates on loans, these lenders have raised their interest rates and cut back on the loans they are approving.

Now while this may all sound like doom and gloom, it really isn’t, it just means that a dealership has to work that much harder to get a loan approval.  Yes, the rates may be a little higher and yes, the interest rates have come up a little, but we are seeing that happen in the prime market too.  As a store we have lost six lenders over the last eight months, while that may sound like a lot you have to put it in context, six out of 80+ lenders still leaves us with a pool of well over 70 lenders.

Now is as good as time as any to buy a vehicle, just keep in mind that money down is now a major sticking point with the banks and in may take a couple days of negotiation on the dealers end to get that final approval.  So if you have less than perfect credit, be patient with the dealer, chances are they are doing their best to get you approved, they just have to kiss a lot more you know what to get there.