#AutoFinancing

The easy-credit train keeps on rolling in the auto world, with credit rating agency Experian reporting new records in key auto finance metrics.

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.

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.

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.