By David Pitt, AP Personal Finance Writer
DES MOINES, Iowa (AP) — It's getting easier to get a car loan.
"A couple of months ago, it was horrible," says George Magliano, an automotive research analyst with IHS Global Insight. "The least blemish on your credit report and you got nothing."
The loan approval rate for customers with the highest credit scores was 90% in June after sliding to 70% in late 2008 during the recession. It's this group that's taking advantage of the widely advertised zero-percent financing deals.
For the majority of consumers with middle-tier credit, in the range of 620 to 750, loan approvals jumped 12 percentage points in the past year to above 82%, says CNW Marketing Research of Brandon, Ore. Plenty of banks are eager to make deals.
And now, even those with poor credit scores are getting a break.
Historically, the approval rate for subprime borrowers — those with scores below 620 — ran about 60%. Last year, the rate fell to 5%. Now, it's running at 9%.
Subprime borrowers still need to make a sizable downpayment and will pay interest of 10% or more, but car buyers with poor credit make up a big chunk of the market.About 17% of all the auto loans written for new car buyers in the first quarter were to customers with below-prime credit. This same group obtained 53% of the loans for used cars, according to the credit reporting agency Experian.
Selling more cars is vital to an economic recovery. The auto industry accounts for around 3% to 5% of the nation's gross domestic product and about 16% of all durable goods shipments. Better access to credit is an important step to selling more cars and helping an industry that has seen 250,000 jobs disappear in the past three years. Nearly 830,000 auto-related jobs still exist in the U.S.