The global outlook for Auto Back Securities (ABS) is steady – except in North America, where underwriting standards and borrower credit are slipping. (Read More…)
Tag: auto financing
The Federal Trade Commission is launching an investigation into biweekly payments sold as a product by dealership finance departments on the basis that consumers may not be getting their money’s worth with such payments.
Currently, around 2.13 million cars will come off-lease by the end of 2014, up from 1.7 million last year. By 2016 and beyond, however, over 3 million vehicles annually will turn up on many a CPO and used car lot, replacing a long drought with an El Niño-esque flooding of the U.S. used car market.
With Ally Financial’s IPO now making the rounds on the New York Stock Exchange, the former financing arm of General Motors has its eyes on taking more of the subprime market, a move benefiting dealers once the last ties to the U.S. federal government have been severed and sold to the stock market.
As fears of increasing auto loan delinquencies are giving some lenders pause, Capital One Auto Finance president of financial services Sanjiv Yajnik calls said increase a return to “norm,” with pent-up demand and greater competition will maintain availability of credit.
According to credit reporting bureau TransUnion, auto finance has a bright future ahead in 2014, with easier access to credit and bigger loans for consumers.
Months after TTAC started to relentlessly bleat about the glut of money flowing into the auto loan sector, the mainstream media is finally taking notice. Automotive News is finally expressing some worry over the factors that we’ve been discussing for some time: car loan terms are getting longer (to help keep payments low), subprime lending is increasing and an expected rise in interest rates could put an end to the new car market’s exuberant performance.
Over at Autobytel, Juan Barnett (better known as DC AutoGeek) takes a look at the history of auto financing, originally intended as a way for the common man to be able to afford an automobile some 90 years ago. The most striking thing is how attitudes have changed so dramatically over time.
Initially, bankers were calling for a ban on financing of personal automobiles, fearing that it would lead to financial imprudence. How times have changed.
In a 2008 letter to the Security and Exchange Commission, a collection of automotive finance companies argued against a proposed federal rule that would have made 60 months the maximum term for an automotive loan. The group said “[that the] 72 month term has become the industry standard,” and that it was critical to the American economy to allow banks to determine independently the risk as it relates to automotive loans. They argued that any mandated term limit would cripple the automotive industry. They were probably right.
8 years to pay off a car? A report by the Wall Street Journal claims that in Q4 of 2012, the average car loan stretched out to 65 months, or just over 5 years. Loan terms were being stretched out over increasingly longer terms too, with credit firm Experian reporting that nearly 1 in 5 car loans had terms between 73 and 84 months long, with some stretching for as long as 97 months.