Many dealers are looking toward subprime clientele for new auto finance leads. As banks start to restrict their lending requirements, demand for these services has increased. Many car loan leads may be found in this growing market.
But, first, who is considered subprime to lenders? Those who count as subprime are buyers who hold a credit score of 500 to 600. The next tier down is called deep subprime. Deep subprime buyers maintain a score ranging from 300 to 500. Lending to those with subprime credit has benefits including the ability to offer cars to more people. New leads for auto loans may come from helping people to find a new car who otherwise wouldn?t qualify.
What possible benefits are there for dealers? On the whole, subprime financing interest creates $10 billion in revenue each year. What makes this more profitable for auto sales is that most car loans are now over a longer duration of time meaning, more money will be paid in interest for a used or new car. Lenders are writing more loans for five or six years. The average length of a new car loan is now an all time high 66 months, while used car loans will last an estimated 62 months. The loans are extended for longer periods of time so that buyers can afford the monthly installments on more expensive vehicles. Interest rates for car loans are also increasing. From May 2014 to May of 2016, rates increased form 4.13 percent to 4.25. This increase results in a potential growth for lenders, and an opportunity for more auto lead generation for those who finance.
Diversifying auto leads and the sources of revenue is important in the rapidly changing times of new technology. Consider that the interest from auto financing leads to $98 billion in revenue each year. It’s likely reaching out to this burgeoning market as it may represent a growing opportunity for new auto finance leads. Consumers and dealers are actively looking for these services. As the industry continues to change, it?s important to adapt to the times. This may offer a way to stay competitive on dealer assisted financing.