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Posts Tagged ‘auto lending’

Lenders Continue Easing Access to Auto Loans

Banks, finance companies taking on more risk.

by on Mar.09, 2015

Bank regulators and analysts are wondering if it's too easy to get a loan for a car.

The rising volume of new car loans is drawing the attention of bank regulators and analysts, who are watching for signals about what the increasing demand for loans says about the state of the economy and the car business.

Researchers from the Federal Reserve Bank of Cleveland noted that newly originated auto loans hit $105 billion in the third quarter of 2014, which is the highest level since 2005.

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Federal Reserve Bank of Cleveland researchers Emre Ergungor and Caitlin Treanor claim the rapid growth in auto loans is due to an increase in the demand for cars and a continuing easing of standards in the supply of credit. (more…)

Dealers Reject Fed Plan Single Interest Rate for Car Buyers

NADA’s McConnell says idea will raise costs to consumers.

by on Oct.08, 2014

NADA Chairman Forrest McConnell claims a plan to charge car buyers the same interest rate will raise prices.

A proposal to mandate a single interest rate auto lenders can charge car buyers to ensure minorities weren’t discriminated against would only cause all buyers to pay more for a car, according to the National Automobile Dealers Association.

In a speech at an Automotive Press Association luncheon in Detroit, Forrest McConnell, president of McConnell Honda Acura in Montgomery, Alabama, and chairman of NADA, said the recommendation by the Consumer Financial Protection Bureau (CFPB) to require auto dealers to use a standard interest rate for all financed purchases denies buyers “their right” to a discounted interest rate.

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“The government is trying to take away a customer’s right to get a discount,” he said. “The Consumer Financial Protection Bureau, CFPB, is working on statistical anomalies.” (more…)

Lenders Cutting Back on Subprime Loans

Credit challenged getting fewer loans and less money.

by on Sep.03, 2014

Lenders are loaning less money, less often to subprime and deep subprime buyers these days.

While auto sales sizzled in August and have been brisk for the year, the lenders helping to move that metal are no longer relying on the subprime buyers to keep the good times rolling.

The percentage of new vehicle loans going to consumers in the subprime and deep subprime segments was at 15.1% in Q2 2014, down from 22.1% in Q2 2013, according to Experian Automotive. Subprime buyers have credit scores ranging from 619 down to 550 while deep subprime is anyone below 550.

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The numbers are still higher than the low of 10.2% during the depths of the recession in 2009, the current figures are still well below the prerecession level highs of 16.6% in Q2 2008 and 19.9% in Q2 2007, the company reported. (more…)

Auto Sales Jumping as Banks Loosen Credit Reins

Despite rise in subprime lending, defaults at near-record lows.

by on Jul.31, 2014

Banks have loosened the credit lines and as a result auto sales are booming in 2014.

It’s becoming clear that one of the primary reasons that new car sales are booming this year is that Americans are able to more easily get credit to finance their purchases. The total amount of outstanding auto loans has increased by 10% in 2014.

According to Equifax and its National Consumer Credit Trends Report, there is $902.2 billion in outstanding auto loans, which is a new record.

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“Auto lending continues to thrive, accounting for more than 50% of all new non-mortgage lending through April of 2014,” said Dennis Carlson, Deputy Chief Economist at Equifax. (more…)

Are Subprime Buyers Saving the Auto Industry?

Loans up, defaults down.

by on Sep.07, 2012

More subprime buyers are finding loans again.

Last month’s unexpectedly strong automotive sales numbers run counter to most other recent U.S. economic trends and buoy hopes the nation will escape a double-dip recession.

While a variety of factors appear to be propping up automotive demand – despite earlier forecasts of a slowdown – one key reason for the sales surge appears to be increasing availability of financing, especially for so-called subprime buyers.

During the depths of the recession, when U.S. new car sales slipped to a crushing 10.5 million low in 2009, even those with the best credit scores found it difficult to get financing and leases all but vanished.  Now, however, the financing situation has turned around.

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In fact, there were more subprime loans written in the second quarter of 2012 than in the period before the nation’s economic collapse, according to financial tracking firm Experian Automotive.

But is that posing the risk of future problems down the line, especially if the continuing high jobless rate leads to higher loan defaults?


Lenders Loosen Up Car Loans

Sub-prime lending returns – for those willing to pay the price.

by on May.31, 2012

Lenders are returning to the automotive market, according to a new study.

Even in the depths of the Great Recession there were plenty of folks willing and seemingly able to buy new cars.  The problem for many was a lack of loans.  Banks and other lenders all but shut off the spigot, refusing to do business, in some cases, with even the most credit-worthy customers.

While financing still isn’t quite as readily available as it was during the bubble years – when some lenders were willing to offer so-called NINJA loans, for those with no income, no jobs or assets – consumers are once again beginning to find credit easing up, according to a survey by Experian Automotive.

The good news for both new and used car shoppers is that loans are not only more readily available they’re also being offered at lower rates.  Experian’s latest survey also found lenders beginning to wade back into the waters of sub-prime lending – though shoppers with risky credit histories are paying substantially higher rates.

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“During the first quarter of 2012, car shoppers definitely found more favorable conditions for their vehicle loans,” said Melinda Zabritski, director of automotive credit for Experian, which tracks lending and credit. “A reduction in average credit scores, lower interest rates and a lengthening of loan terms are all very good signs for the market and offer great opportunities for consumers looking to make a deal on a new or used vehicle.”


Rising Consumer Confidence Likely to Buoy Auto Sales

Separate study finds auto lending market loosing up.

by on Feb.29, 2012

Automakers stand to benefit from the rise in consumer sentiment - and an upturn in lending.

A sharp rise in consumer confidence – which helped drive the Dow Jones Industrial Average to a 13,000 close for the first time since 2008 – is likely to also help push the auto industry towards a faster recovery than initially expected.

Consumer confidence, which is also one of the key indicators for car sales, remained strong in February due to a record number of consumers who were aware of ongoing increases in jobs, says University of Michigan economist Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers.

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A separate study further buoyed prospects for the auto industry by showing that lenders continue freeing up more cash for potential buyers.

February marked the sixth consecutive month of gains in the Sentiment Index as consumers became more positive about prospects for the economy. But there was a downside, researchers warned.


GM Takes Major Step to Sever Ties to Former GMAC

GM Sets $1 bil Price Tag on Ally Financial Shares

by on Mar.23, 2011

GM takes another step to sever ties with the former GMAC, now known as Ally Financial.

General Motors has announced it will use a new public offering to sell off $1 billion in preferred stock in Ally Financial Inc. — further distancing itself from its long-time in-house lending arm.

The shares represent 100% of the outstanding Series A preferred stock for Ally, which used to be known as GMAC, for decades the so-called “captive finance subsidiary” of the Detroit automaker. GM gave up control of GMAC in 2006 and has since taken steps to expand its sources of automotive lending.

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“Today, we are taking another step forward in our strategy to strengthen and simplify the company’s balance sheet,” said Chris Liddell, GM outgoing vice chairman and chief financial officer.

The transaction will result in a book gain of $300 million to be recorded in the first quarter of 2011. Following the sale, GM’s investment in Ally Financial will consist of a 9.9% interest in Ally common stock. GM reportedly passed on an opportunity to exchange the preferred shares for more equity in Ally Financial, which was originally known as General Motors Acceptance Corp.


GM Buys AmeriCredit, Aims To Rebuild In-House Lender

GM Financial deal valued at $3.5 billion.

by on Sep.29, 2010

GM's purchase of AmeriCredit will permit it to create a new "captive finance" subsidiary.

With the $3.5 billion purchase of lender AmeriCredit, General Motors plans to create a new, in-house financing arm, GM Financial, to replace the “captive” lender long known as General Motors Acceptance Corp.

The Detroit automaker was recently rebuffed in its bid to regain control of GMAC, now known as Ally Financial.  Having a wholly-owned financing unit, GM believes, can help enhance its ability to sell cars, trucks and crossovers while providing an additional profit center of its own.

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“This acquisition allows GM to offer an enhanced range of solutions for our customers and dealers, and establishes an important strategic capability for GM,” said GM Vice Chairman and Chief Financial Officer Chris Liddell.


Late Auto Loan Payments Falling

Declining rate suggests motorists gaining control of finances.

by on Aug.30, 2010

Auto loan delinquency rates are falling, even as loan availability rises.

U.S. motorists seem to be getting a grip on their household budgets and are doing a better job of getting auto loan payments in on time.

The auto delinquency rate took a sharp rise in recent years, a reflection of the worsening economy – and a mirror of the increased mortgage default rate.  In turn, that led lenders such as the former GMAC, to tighten down on auto loan availability.  At one point, in the latter half of 2008, it took a nearly perfect credit score to secure a loan from a General Motors dealer.

But industry officials report that lenders are again loosening up, at least a bit, and a declining delinquency rate is one major factor.  According to TransUnion, one of the three big credit reporting agencies in the U.S., the late loan payment rate dropped to 0.53% during the second quarter of this year, down from 0.73% during the April – June period in 2009.

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As is normal, rates varied widely across the country, from a minimal 0.28% in North Dakota to 1.05% in Mississippi.  But, significantly, the delinquency rate rose in only three states, Rhode Island, Utah and Montana.