Car loans harder to get, report finds

ShareThis

Auto dealers and prospective car buyers have been wailing about tight credit. Now, new numbers explain their pain.Californians receiving approval for new-vehicle loans in three credit categories -- prime, near-prime and subprime -- dropped sharply in the Jan. 1 to Sept. 20 period compared with last year, according to CNW Research, one of the nation's top auto industry tracking firms."Even a prime customer is having a significantly harder time getting a loan approval," said Art Spinella, president of CNW. CNW said 76.3 percent of prime auto loan applications in California were approved in the January-September stretch, down from 89.4 percent in the same time period in 2007. Borrowers in the prime category have the highest credit ratings.Other highlights:-- Near-prime loan application approvals fell from 82.5 percent last year to 69.2 percent this year.-- Higher risk subprime loans saw the biggest plunge statewide: a 20 percent approval rate this year compared with 71.2 percent in 2007.On Wednesday, domestic and foreign automakers blamed woeful credit conditions, among other issues, for steep sales losses nationwide in September, compared with a year ago.CNW said 81.3 percent of U.S. new-car buyers were approved for prime loans from January to September, down from 90.6 percent in 2007.Near-prime approvals nationwide were 77.4 percent, compared with 85.5 percent a year ago. Subprime approvals this year in the United States were 22.7 percent, down from 67 percent in 2007.In past years, prime and near-prime loans were virtual slam-dunks for auto buyers. Even subprime loans -- generally for those with past financial problems, young consumers who have not established credit or those with credit scores below 640 -- were approved fairly regularly.Not only is the loan-approval rate down statewide, but those who ultimately were approved for auto loans in the first nine months this year had to go to more financial institutions than last year, CNW's analysis showed. That's a sure sign of a tight credit market.Loan rates are currently averaging in the mid-6 percent range and higher, depending on the length of the loan. Dealers sometimes offer lower rates."It's a tough time for customers. Some of them are getting turned down for loans that used to be automatic," said Katina Rapton, general manager of Mel Rapton Honda in Sacramento. "We try to help them as much as we can, but things are very tight."The difference between approval and not getting it is sometimes very small. It makes it tough for us to sell cars and tough for people who want to buy them."Reach Mark Glover at mglover(at)sacbee.com. For more stories visit scrippsnews.com