These Cars Are Big With Subprime Buyers
Is your credit rating damaged? Do you need a new car?
You might want to consider buying a car from Chrysler or Kia , like the Kia Forte pictured above.
Chrysler and Kia are the automakers with the biggest presence on a new list of top 10 new vehicles bought by subprime borrowers who worked through CarFinance.com, a site that helps subprime buyers find financing.
CarFinance.com's data set isn't big enough for us to draw too many conclusions about what actually might be going on here. But I found it interesting, because the automakers on the list have seen big growth since the economic crisis.
And for a couple of those automakers, there's some evidence that subprime lending might have a lot to do with that growth.
10 cars popular with subprime buyers
Here are the vehicles on CarFinance.com's Top 10 list, in order:
This list probably reflects a limited data set, but it has a lot of overlap with one released by auto-data site Edmunds.com last year. That list showed the top 10 new cars with the highest percentage of purchasers paying more than 10% interest on their loans, which Edmunds considers an indicator of subprime status. The Avenger, Forte, Sentra, 200, Journey, and Versa were all on that list as well.
Not surprisingly, almost all of the vehicles on the list are value-priced choices. Chrysler markets the Dodge Avenger as America's "most affordable midsized car," and the South Korean-made Kias are positioned as stylish but inexpensive alternatives to the mainstream Japanese brands.
The exception is the Focus, which Ford has positioned as a somewhat premium product. But its position on this list might just reflect its general popularity -- Ford said recently that the Focus was the world's best-selling car in 2012.
Like most automakers, Ford has an in-house financing arm, Ford Credit. And like most automakers' finance companies, Ford Credit does make loans to subprime buyers. But Ford Credit is quite conservative, generally speaking, and officials said late last year that their "high risk" loans were in the 5% to 6% range -- in line with the industry average, and not a cause for concern.
The story is a little different with Chrysler, though. Chrysler doesn't have an in-house financing arm, for one thing. And for another, it has always had a reputation for being a little more willing than most to find deals for customers with damaged credit.
Chrysler and Kia top the subprime list
Chrysler's reputation has some data to support it: Data from credit agency Experian last year showed that in the first quarter of 2012, 29% of Chrysler's customers had credit scores below 680, which Experian considers subprime.
That was good enough for second place among the automakers doing business in the United States.
Care to guess who was in first? If you guessed corporate cousins Hyundai and Kia, who together have 31%, you got it.
Now, if I tell you that Chrysler's U.S. sales were up 21% last year, does that suggest anything? Or that Kia had a streak of 27 straight months of U.S. sales growth that ended only last December?
I don't know if it does. But the economic downturn left a lot of Americans with dents in their credit ratings. It might well be that these companies are more willing to reach out to these folks than others are-- and that might turn out to be a sales advantage nowadays.
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The article These Cars Are Big With Subprime Buyers originally appeared on Fool.com.Fool contributor John Rosevear owns shares of Ford. Follow him on Twitter at @jrosevear.The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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