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Auto lenders are looking to entice buyers with lower interest rates as well as relaxed rules for subprime buyers.

With auto sales slumping this year, lenders are searching for ways to entice buyers back into showrooms.

It worked in July as sales rose slightly for the first time in 2019, but only after lenders cut interest rates for three consecutive months, dropping new vehicle loans for borrowers with good credit down to a 5.8% interest rate.

Analysts believe that rate will stick for the rest of the year. Two additional reports reveal automotive lenders are easing restrictions on securing a loan in general for buyers with lowest tier of “prime” lenders as well as subprime buyers.

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The Federal Reserve’s Quarterly Report on Household Debt and Credit shows that auto loan and lease originations were up 2.9% during the second quarter to $155.6 billion. This follows

The increase pushed total U.S. auto debt to a record $1.3 trillion, up 4.8% from a year ago. It mirrors the trend from the first quarter of the year. Some of the increase came from the rise in subprime lending practices.

Within the total for the second quarter of 2019, originations for customers with credit scores below 620 rose 1.6% from a year ago. The New York Fed considers 620 the cutoff for subprime. Originations increased 4.3% for the credit score range of 620 to 659. The biggest year-over-year quarterly increase was in the range of 720 to 759, up 5.6%.

According to Equifax, 1.39 million auto loans have been originated YTD to consumers with a credit score below 620. This is a 1% decrease from March 2018. These newly issued loans have a corresponding total balance of $25.5 billion, a 2.4% increase year-over-year.

New car sales are expected to fall in 2019 despite efforts by lenders to draw in more buyers..

Through March, 23.5% of auto loans were issued to consumers with a subprime credit score, and they accounted for 18.8% of origination balances. In 2018 YTD, the account share was 23.5% and balance share was 18.6%.

The average origination loan amount for all auto loans issued in March 2019 was $23,182. This is a 3.1% increase over March 2018. The average subprime loan amount was $18,552. This is a 3.6% increase compared to March 2018.

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In the year-ago period, the lending was trending in the opposite direction with second-quarter figures showing lenders were tightening access. Loans in the highest category, credit scores of 760 or higher, were up 9.2% last year, while every category below 720 fell.

“We’re certainly keeping a close eye on credit trends as they relate to originations and balances for both financed and lease environments as we move through 2019,” said Jennifer Reid, Equifax’s vice president of Automotive Marketing and Strategy.

“The lower percentage increase in balances for loans and leases at the end of March indicates that dealers and lenders continue to need advanced data to help them stay ahead of the competition by deciphering key consumer and market trends driving a change in vehicle affordability patterns to arrive at the right price and loan balance.”

New York Fed analysts are watching carefully the increase in auto delinquencies. For the second quarter of 2019, loans representing 4.6% of the outstanding automotive balance were 90 days- delinquent, up from 4.2% a year ago.

To put that in context, the recent low for 90- days was 3.1%, for the third quarter of 2014. The hig

Lenders are relaxing the rules for subprime loans to attract more consumers..

h was 5.4%, in the fourth quarter of 2010.

The New York Fed is monitoring the rate at which auto accounts transition into delinquency, especially “severely derogatory” delinquency, which the Fed defines as delinquency of any duration coupled with a repossession or charge-off.

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Auto loans now make up a bigger percentage of severely derogatory accounts. But analysts said that’s in large part because mortgages have fallen as a percentage of the total since the economy recovered from the Great Recession.