Tag: Auto Loans

By on December 6, 2013

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Though the calendar is about to change to 2014, it appears to be 2007 all over again in dealer lots and showrooms nationwide as a record number of auto loans with low interest rates were signed during the third quarter of 2013.

(Read More…)

By on November 29, 2013

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According to Moody’s Investors Service, increased competition for issuing auto loans will result in lenders taking greater risks and lowering underwriting standards. “Auto lenders will continue their return to higher levels of risk-taking, a trend that emerged in 2013 and will gain momentum in the coming year,” Moody’s analysts Jeffrey Hibbs, Mack Caldwell and William Black wrote in a report published Monday. Greater competition between lenders will result in “ever-more generous loan terms,” they said.

As the economy has slowly improved, losses on vehicle debt are down across the board, regardless of creditworthiness, compared to historic norms. That fact and continued low interest rates are attracting lenders into the car loan market. (Read More…)

By on October 14, 2013

Subprime-Auto-Lenders

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.

(Read More…)

By on August 26, 2013

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According to a report issued last week by the U.S. Federal Reserve Bank of New York, car and light truck loan originations have reached a six-year high. Automotive News reports that for the second quarter of 2013, new loans went up 11% to $91.8 billion, including consumers with all credit ratings. U.S. light vehicle sales were up 9% for the quarter from last year.

The Fed said that the biggest year to year change was in the 621-660 credit score range, just below “prime” rankings. That tranche rose 16% to $12.1 billion. Loans to those with worse credit, a score below 620, were up ~11% from 2012 to $21.2 billion.

(Read More…)

By on April 15, 2013

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.

(Read More…)

By on April 5, 2013

March was the 5th straight month of a SAAR above 15 million vehicles.  Industry analysts have explained the strength of the market in a number of ways. The need to replace older vehicles is one (new car sales were hit hard during the recession as consumers held on to their vehicles for longer. This also caused used car prices to skyrocket, something TTAC has been documenting), while others have cited increasing fleet demand, and the desire to replace vehicles damaged in Hurricane Sandy.

But one factor that is just starting to get attention outside of TTAC is sub-prime financing. Sub-prime lending, which involves giving high-interest loans to customers with poor credit scores, is driving the SAAR in a big way, by letting buyers with poor credit purchase new cars. In turn, the sub-prime bubble is being driven by Wall Street, whose clients cannot get enough of financial instruments backed by sub-prime auto loans.

(Read More…)

By on April 28, 2010

Anywhere there’s a gold rush, competitors have to worry about getting caught on the bust-end of a boom-bust cycle. With the growth of China’s car market projected to roll all the way to about 20m units annually, automakers hoping to cash in on booming sales have to wonder whether their investments in Chinese capacity will actually be used efficiently. And, as the European market is learning, government consumer incentives can also inflate projections, only to create a collapse in demand after they are phased out. These factors have combined to create a bit of a panic about the possibility of a Chinese-market oversupply, as financial analysts start reigning in automakers’ rampant Sino-optimism.

(Read More…)

By on January 15, 2010

The TARP bailout of GM finance partner GMAC is being criticized by a congressional oversight panel [full report in PDF format here], reports the Detroit Free Press. The panel alleges that the Treasury

has not yet articulated a specific and convincing reason to support the company… It has never stated that a GMAC failure would result in substantial negative consequences for the national economy. If Treasury has made such a determination, then it should say so publicly.

(Read More…)

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