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Auto finance sources went on the offensive during the third quarter, with loans made to credit-challenged customers representing just less than a quarter of new-vehicle loans during the period. And all signs point to auto lenders continuing to loosen their guidelines as consumers look to replace their aging vehicles.

Fueling their confidence were car buyers, who continued to do a better job of paying their loans. The ongoing drop in 30- and 60-day delinquencies continued to help drive down the total volume of at-risk loan amounts by nearly $3 billion. Also putting finance sources in a better mood was the fact that many of those risky 2007 and 2008 originations began coming off the books during the quarter.

Industry observers might be nervous about higher volumes of loans made to high-risk car buyers, but the right level of managed risk would allow dealers to open up potential sales to a larger pool of customers. And as noted by finance executives during a panel discussion at the magazine’s annual conference in September, there is a higher concentration of subprime customers entering dealerships. Some insiders estimate that about 40 to 50 percent of potential car buyers still fall into the subprime category.

via F&I Magazine.

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