The American love affair with their cars goes back to the days of Henry Ford. More and more people are buying cars. More than 17.5 million cars were sold in 2015. That represented a 5.7% increase from 2014. The New York branch of the Federal Reserve Banks reports that there was more than $1.1 trillion in outstanding auto loan debt in the last quarter of that year.
Subprime loans gained a bad name with the financial crash from the housing bubble in the United States in 2008. When lenders look at borrowers the label some as “prime” and others as “subprime.” This is basically dependent on the individual’s credit score. People with good credit scores are deemed to be prime lenders and those whose credit is not great are subprime lenders. While some lenders used unscrupulous methods to get people to borrow money, many others were helped by getting sub prime mortgages. Freelance workers and small business owners who had a steady but not traditional income were able to buy homes.
Subprime auto finance leads offer that same opportunity to individuals who have bad credit to buy their own car. The idea of subprime leads is not, in and of itself, a bad thing. Many people in the United States, at least 20%, consider themselves to be in “debt hardship.” Many people work in non-traditional jobs and do not have the same credit rating as people who have regular jobs with set paychecks.
There are also very valid reasons people have seen their credit scores tumble. Medical debt causes a great number of bankruptcies in the United States. Others find themselves out of a job, through no fault of their own. For some time, California’s budget woes meant that they paid many state employees with IOUs rather than paychecks. These people were working as they always did but were not getting paid for it. The same was true during the government shutdown a few years ago. Another category of subprime lenders are recent college graduates who do not have much of a credit score because of their age. Subprime auto finance leads allow these people to both get the vehicle they need and rehabilitate their credit score at the same time.
For car dealerships, offering subprime auto finance leads or working with lender who do can open up new revenue streams and bring in new customers. Many of these subprime lenders do not have bad credit because they are deadbeats or do not want to pay their bills. In February 2015 there were over 3,400 personal bankruptcy filings every day.
Many of the people who do not have great credit are not any more of a risk than people with amazing credit. They may be on their way to getting their credit back into a good state and would jump at the chance to show they are responsible borrowers. These people are dedicated to making payments on time. Offering subprime auto finance leads to these people offers car dealerships with a chance to show their commitment to people in the community.
For people who have bad credit, subprime auto financing leads can really be lifesavers. There are some parts of the country where it is possible, or even preferable, to live without a car. Cities like New York and Washington, DC have transit systems that make owning a car unnecessary and more costly. The car insurance rates in these places makes car ownership an expensive proposition.
There are also many places throughout the United States where owning a car is very much a necessity. For people with children, not having a car can really be a hardship. These people should approach the banks and financial institutions where they do business first to see if they can secure subprime auto financing for a car before they go to a dealership. Some credit card companies have even entered the subprime auto finance game so anyone with a credit card should ask that company if they offer this kind of loan.
Like with any kind of loan, borrowers should shop around for the best deal. Both car dealerships and car buyers can benefit from the availability of subprime auto loans.