By on April 2, 2018

Sales situation in a car dealership, the young couple is signing the sales contract to get the new car in the background, Image: Kzenon/

It’ll be another 24 hours before the nation’s automakers release March sales figures, all thanks to the Easter long weekend. Shaking off the effects of a chocolate bunny induced sugar high takes a day or two, after all.

This means, at most dealers, last month’s subvented rates still apply — so, if you’re looking at snagging a 2017 model, it might not be a bad idea to lock the deal down today. Shoppers of MY2018 machines can relax, as the deals on those rides will likely be better tomorrow morning … especially if it’s a vehicle that was majorly reworked for 2019.

Until then, we have time to peruse a story from Bloomberg, one which pontificates on the sudden evaporation of subprime new car buyers from showrooms in the month of March.

Evaporation? I thought there was a glut of them! Let’s dig into the report.

According to J.D. Power, rising interest rates and the steady upward march of new-vehicle prices are squeezing shoppers with shaky credit and tight budgets out of the market. Through February this year, the analytic company said sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9 percent.

Studying the J.D Power chart provided by Bloomberg, 64 percent of new car buyers in Q1 of this year had a credit score of 720 or higher. The same information says they haven’t made up that much of the new car buyer mix since the dark days of 2009. It is posited that, after the Great Recession, many fine folks who were in good financial standing suddenly found themselves without work (*your author raises his hand*), hurting their credit score. Today’s higher ratio of 720+ consumers could simply be chalked up to the fact there are more of them in the car market, now that they’ve righted financial ships upended by an untimely job loss.

Certainly, there will always be a portion of the population for whom the credit crunch is simply a breakfast cereal, meaning there will always be 720+ shoppers. On the other hand, a full 10 percent of new car buyers apparently have a credit score below 624, meaning one in 10 people who sign on the line that is dotted do so on a note likely carrying an interest rate well into the double digits.

“On a macro basis, we do see that the luxury side continues to grow; prices continue to go up there,” said Henio Arcangeli Jr., Honda’s top U.S. sale executive, in an interview with Bloomberg. “But more in the mass market, pricing is staying firm, so I do say where the industry is probably leaking is on the bottom.”

New parents across the country will confirm Mr. Arcangeli’s assertion of how troublesome things can be when they start leaking from the bottom. The data gathered here shows that customers outside the two extremes (not above 720 but not below 625) comprise the thinnest slice of the pie since 2009, with 26 percent of car shoppers falling in that range this year (compared to 30 percent just two years ago).

Analysts, who often predict the future with the same amount of accuracy as a weather forecaster, are pegging sales this March to be on par with activity during the same period one year prior — keeping in mind there is one less selling day in March 2018.

We won’t have long to wait. Last month’s sales numbers will be released tomorrow.

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26 Comments on “Vanishing Act? Fewer Subprime Customers Shopping for Cars...”

  • avatar

    Which manufacturers would you say this news has elicited the most and least panic in?

  • avatar

    Sir, you have to click the pen in order to write.

  • avatar

    Someone got a long weekend on Easter? Must have been Canuckistani communists. Here in Murica we don’t do holidays.

    (Just a little bitter after spending most of the weekend working.)

    • 0 avatar

      I didn’t work over the weekend but I share your sentiment. Our Australian offices get annual leave for Easter. Must be nice.

      • 0 avatar
        Big Al from Oz

        Best weather this time of the year and the fishing is good due to the warm East Australian current down the coast.

        • 0 avatar

          Really makes me want to visit New Zealand. Never been there but people have told me it’s great!

          • 0 avatar

            Yup, we enjoyed our four day weekend. Great weather too.
            Toyota announced a no bargaining policy, fixed price and up to $10K reductions.
            No news on if Lexus can actually supply a car to the NZ market, we’ve been waiting five months for them to deliver my partners C200H. Just about to tell them to stick it and buy a Kia

        • 0 avatar

          Screw you w your good weather, 6 inches of snow in my yard in NJ today in Freaking April, when is spring getting here???

          • 0 avatar

            LOL! My brother had tickets to the NYY/TB game today.

            It was postponed due to SNOW!

            I howled when he called to tell me that.

  • avatar

    people are doing the math. if you’re in an area with uber service, Uber > subprime car loan. Paying a Uber driver a net-profit rate of $9/hr > running your own car. and more reliable too

    • 0 avatar

      Good point.

    • 0 avatar

      I could spend less on transportation by using Uber and Lyft today – I don’t care. I like cars, enjoy the five in my stable, and don’t regret a single penny spent.

      For sure, given my experience with Uber, NOT more reliable. Had one Uber get in an accident right in front of me in DC as they were turning in to pick me up, another with me in it NYC. Have had a couple just not show up. MANY who had no clue how to get to where I was, despite the app (which is utter crap for navigation). I still use them a lot where I don’t want to rent a car, mostly because the receipts automatically go into my company expense system so I don’t have to bother with them, unlike a regular cab.

      • 0 avatar

        It is true that people are doing the match if Uber or Lyft service is available to them.

        But in outlying areas in fly-over country where owning a car is essential to mobility, fewer people appear to be shopping for a car, even if they have great credit.

        And it is hurting the dealers of all persuasions, new and used.

        Maybe the increased availability of taxi service and medical-transport service has also had an influence on demand.

    • 0 avatar

      They are doing the math and discovering the extraordinary glut of vehicles in the used market. All they have to do is pinch pennies for six months and they can afford an good/excellent condition 10-12 year old vehicle.

    • 0 avatar
      bumpy ii

      People in the subprime market generally don’t “do the math”.

  • avatar

    Well part of it may be no real reason to get a new car, my wife Pilot is an 05 which we bought new, there is nothing wrong with it, 115,000 miles and runs great, we have talked about a new car for her , but there is nothing out there that makes us run to sign a loan, it makes sense to buy now with kids between collage but we really do not need to, next kid does not need a car until next June so we will more than likely just wait.

    • 0 avatar

      You’ve got a lot of miles left in your Pilot.

      One of my ancient friends has ~185K on his Pilot and only did routine maintenance (by the Honda dealer in town) to it.

      He and his wife have driven that Pilot just about everywhere traveling across the US, from CA to Maine, and Fla and Washington State too.

      No problems at all.

      • 0 avatar

        Yeah, I am in the same situation with my wife’s Pilot. 2006 with 173,000 miles. Runs like a dream with just a bit of whine from the PS pump. Some sort of small rubber gasket there going bad I think and sucks in air. No reason to trade in. We keep talking about but why get into payments when I don’t have to?

        • 0 avatar

          Yup. 08 MDX, just ate an alternator at 165k, now has 178k, but other than tires shocks and brakes, keeps ticking. Drove NY-WI recently and sat at speed for hours. I’ve done everything except oil changes by computer. Went to the car show. New is nicer, of course, but until the MDX explodes, no reason to jump on at least a 40k expense. It’s a good appliance..

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