Toyota Announces College Grad Rebate – Another Sign The Credit Market Is Coming Back

Toyota’s decision to offer a college graduate rebate on a handful of entry-level Toyota and Scion vehicles (including our favorite, the Tacoma) isn’t just a nice gesture designed to sell cars to recent grads – it’s also a sign that the automotive credit market is returning to normal.

Back in the 2000’s, recent college grad rebates were commonplace. Most captive auto finance companies like lending money to college grads because:

• They tend to stay employed
• They tend to be well-paid ($30-50k a year isn’t a bad wage all things considered)
• They usually have no debt
• For all the reasons above, they have plenty of discretionary income
• They usually have some graduation money for a down payment

Recent college grads – especially recent grads with a couple of low-balance and on-time credit cards – were considered a fairly low risk lending target…and then 2008 happened.

Overnight, college grad rebates and special college grad financing programs dried up. Some manufacturers dumped them completely, while others imposed very strict requirements that all but eliminated the program. Between most of 2008 and most of 2010, it was hard for a recent college grad to buy a new car without having a parent co-sign.

Today? We’re back. Here’s what that means for America:

1. College grad rebates mean college grads are finding jobs. Not all college grads are finding jobs, mind you, but a lot of them are. Enough that Toyota determined a special incentive would be an effective marketing tool.

2. Creditors have relaxed and started to breathe again. In 2001, anyone with a pulse could get a car loan, but then creditors started to realize that was too easy. Then, by 2005, you had to have a job and a little cash to get a car loan. But then in 2009, when the economy was spiraling down, it was hard for someone with cash down, ‘B’ credit, and a long history to get a car loan…not even two years earlier that person was approved automatically. Now, in 2011, we’re back to where we were in 2005.

3. Automakers are pushing leasing again. Toyota’s announcement of a college grad rebate doesn’t explicitly say this program is for leasing only, but this program is for leasing only. Toyota dealers are telling me that Toyota Motor Credit is asking dealers to structure college grads into leases, because leases represent the least amount of risk as well as the lowest possible payment.

You can get this program on a purchase, of course, but it’s a little harder.

Still, the bottom line here is good news: This rebate is yet another sign that the economy is coming back.