August auto sales were above expectations and showed the industry is well on the road to recovery after years of anemic growth. But worries many subprime buyers are getting back into new car showrooms may be premature.
New car loans to subprime buyers fell 7% in the second quarter of 2014, compared to the same period in 2013 when 22.1% of new car loans went to those customers, according to a study by Experian Automotive. Used vehicle loans to subprime buyers tumbled more than 10% in the same period.
This report comes on the heels of automakers posting the best U.S. sales figures in eight years in August, thanks in part to continued pent-up demand and easing credit restrictions. Recent reports, however, show the terms for a new car loan have averaged at more than 60 months, with 72 and 84-month deals becoming much more common.
For now, though, auto sales look back up to a healthy level in the U.S. after a rough few years. Still, sharper minds in the industry aren’t resting on August’s numbers.
By Zac Estrada