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Tue May 22, 2012
Chrysler boosts sales with subprime borrowers
Chrysler's new car sales have been improving faster than almost any other car company in the U.S. in recent months.
But the company has also been relying on subprime borrowers more than almost any other car company.
That's according to Edmunds.com.
People with good credit can usually find a car loan with a four percent interest rate.
But a growing number of Chrysler's customers have poor credit - and their loans have 10 percent interest rates.
Edmunds analyst Jessica Caldwell says it's definitely boosting Chrysler's sales, but there are risks.
"I think subprime can tarnish your image in a way," she says. "If you have a high percentage of subprime borrowers, people start to catch on or think that perhaps your brand isn't as prestigious as you would want to think it is."
Even though subprime car loans are riskier, there is still a relatively low rate of default.
People are much more likely to default on a subprime house loan than a subprime car loan.