Repo Rates Are Spiking: Why Traditional Auto Loans Are Harder to Get

Key Details

• Auto repos are up in the US due to rising inflation and high vehicle prices.
• Borrowers are finding it more difficult than ever to secure car financing through increasingly cautious traditional lenders.
• Getting in-house financing on a vehicle is an option when banks won’t approve your loan.
• Hawthorne Auto Square offers easy financing approval, even for those with poor or no credit history.

Repo rates are spiking across the country. More and more drivers are finding it difficult to keep up with their traditional auto loans as they feel financial pressure throughout their lives. In this guide, we’re explaining how we got here, uncovering the connection between conventional auto loans and rising repo rates, and offering a few alternative financing options to consider if a standard auto loan isn’t fitting your needs right now. Let’s take a look!
What’s Driving the Spike in Auto Repossession Rates?

In 2024, an estimated 1.73 million vehicles were repossessed in the US, a rate not seen since 2009. This troubling trend of rising auto repossessions is driven by a few key factors, particularly higher vehicle prices, long-lasting inflation, and high interest rates. These, combined with higher costs of living across the board, are making repossessions much more common across the country.

Why Are Traditional Auto Loans Harder to Get Right Now?

To understand why auto loans are harder to get right now, we need to look at it from both the lender’s and the borrower’s perspective. For lenders, rising delinquency rates have forced them to tighten their lending standards for younger or subprime borrowers—such as those looking for a car loan after repossession. This, combined with overall lender caution in our difficult market, is lowering approvals.

On the borrower side, we’re seeing high-interest car loan rates and APRs, rising prices on new vehicles, and a nationwide negative equity problem caused by pandemic-era vehicle purchases. These are increasing car loan rejections from traditional lenders, leading to a real issue for the average person in need of a reliable, affordable vehicle.

Why Are Banks Rejecting More Car Loan Applications?

At the moment, banks are rejecting car loans at a much higher rate than in previous years. This is driven by rising delinquency rates and widespread borrower debt, encouraging lenders to shift into ‘protection’ mode as they look to limit their exposure to financial risk. Subprime auto loans can be hard or impossible to secure right now, leading people to look for alternative routes to get auto financing.

How Rising Repo Rates Impact Auto Loan Interest Rates

When commercial banks have to repossess vehicles, it increases their costs to borrow money. This leads them to raise interest rates on consumer auto loans in order to preserve margins. The idea behind this tightening auto credit market is to discourage high car loan rates to help cool inflation, though it can have difficult side effects in the short term for consumers.

Financing Options When Traditional Auto Loans Fall Short

With auto loan approval rates at a long-time low, consumers are looking for other options to help them get on the road. With such high auto lending standards, one of the best ways to get financing for the vehicle you need as a subprime borrower is through in-house dealership financing, otherwise known as ‘buy-here, pay-here’. In this financing model, the dealership itself acts as the lender, which means faster, simpler approval without all the hassle of traditional financing.

Can You Still Get Approved for a Car Loan With Bad Credit?

If traditional, high-interest car loans aren’t a viable option due to your credit score, you’re probably wondering what your options are. The good news? When you borrow for a car with a buy-here, pay-here model, you can secure financing with no credit or a low score. This loan model only requires proof of income, which gives valuable options to consumers who would otherwise be unable to get the car loan they need. 

Why Dealership Financing Can Succeed Where Banks Don’t

Almost everyone needs a vehicle, but for many, the current financial realities make it hard or impossible to get one. Dealership financing can be a great alternative, helping subprime borrowers get access to vehicle financing regardless of their credit score. Car loan approval doesn’t have to be a distant dream when you work with a dealership that offers in-house financing! 

What This Means for Car Buyers in Los Angeles

We know times are tight for many in Los Angeles. But the financial difficulties we’re facing don’t change the fact that most of us need a reliable vehicle to get us from point A to B. At Hawthorne Auto Square, we’re proud to be an alternative avenue for anyone struggling to secure an auto loan through traditional lenders, helping to get you approved and behind the wheel in as little as a few hours.

How Hawthorne Auto Square Helps Buyers Navigate Today’s Lending Climate

Our team is proud to help match our customers in the Hawthorne area with vehicles and financing that fit their needs. With a huge selection of vehicles, many of which are under $15,000, there’s no doubt you’ll find a car that fits your budget and preferences. From here, we help make auto financing simple with fast, easy pre-approval (especially compared to CarMax financing). 

Our financing model isn’t concerned with your credit score — it’s all about the present realities of your financial situation. We can offer approval on virtually any kind of regular income, whether it’s a paycheque, disability benefits, unemployment assistance, or SSI. Plus, we help with all the other important stuff, including helping you secure GAP insurance on your new vehicle.

Get On the Road Sooner with Hawthorne Auto Square

At Hawthorne Auto Square, we strive to work around the unique needs of every customer who walks on the lot. No two people are alike when it comes to their financial situation and vehicle needs, which is why we work hard to find unique, tailored solutions for every client. For more information, to learn about the vehicles currently in stock, or to set up a visit to shop for a new car and get instantly approved for in-house financing, get in touch with us today.

Frequently Asked Questions

What credit score is needed to get a car loan today?

Exact credit minimums vary, but you generally need a credit score of at least 661 to secure a competitive car loan through traditional financing. In-house financing options are a good alternative for those with scores lower than this.

Are used car loans harder to approve than new car loans?

It’s sometimes harder to get approval for a used car loan than a new one. This is due to lender requirements about the vehicle’s age, mileage, and condition, which affect resale value in the event it is repossessed.

What happens if my auto loan application gets denied?

If your auto loan application is denied, you’ll receive an ‘Adverse Action Notice’ which details the reasons why. These may be poor credit, high debt, or insufficient income.