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Posts Tagged ‘new car loans’

Fed Sends Warning About Subprime Auto Loans

The loans have been helping to fuel the current sales boom.

by on Dec.05, 2016

The Federal Reserve is concerned about the subprime loans that are helping fuel the current automotive boom.

While carmakers were celebrating strong sales in November that are expected to aim the industry towards its second consecutive sales record, the Federal Reserve sent a signal that the industry ought to be a little bit more cautious about the subprime loans that have helped fuel the boom during the past couple of years.

In a press release issued the same day that sales figure appeared, the Federal Reserve Bank of New York, which keeps an eye on consumer credit noted in its latest Quarterly Report on Household Debt and Credit that there has been a “small” increase in overall debt in the third quarter of 2016, bolstered by gains in non-housing debt.

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“Mortgage balances continue to grow at a sluggish pace since the recession while auto loan balances are growing steadily. The rise in auto loans has been fueled by high levels of originations across the spectrum of creditworthiness, including subprime loans, which are disproportionately originated by auto finance companies,” the New York Fed noted. (more…)

Car Loans Top $1 Trillion for First Time Ever in Q1

Buyers out in force during first quarter of 2016.

by on May.23, 2016

Auto loans topped $1 trillion in the Q1 this year. It's the first time it's hit that mark in that period ever.

Experian, which tracks auto loans as well as consumer credit scores, reported the total amount of auto loans in the first quarter of 2016 exceeded $1 trillion for the first time ever.

In all, the total volume of auto loans, which includes leases, is up 10% from the same period a year ago, according to the latest data from Experian

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“We’re still seeing strong sales projections which will help fuel this growth,” said Melinda Zabritski, Experian senior director of automotive finance. (more…)

Automakers Bankrolling Half of New Car Purchases

Record auto sales means big money for financing arms

by on Dec.02, 2015

Car buyers are using the captive finance arms of automakers more than half the time for their vehicle financing.

The soon-to-be-record-setting automotive sales year is not only benefitting the bottom line for automakers, but also their captive finance arms that are now handling more than half of all new vehicle sales.

The automaker’s finance companies bankrolled 51.6% of new vehicle loans in the third quarter of 2015, up from 36.8% in Q3 2011. This represents the largest marketshare of new vehicle financing for captives since the recession of 2008, according to Experian Automotive’s State of Automotive Finance report.

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“Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession,” said Melinda Zabritski, Experian’s senior director of automotive finance. (more…)

Spending on New Cars Hits All-Time High, Even as Loans Stretch to Record Lengths

Average transaction prices up 4% in May.

by on Jun.02, 2015

Buyers filled the showrooms of car dealers and added to the bottom lines of automakers in May.

While May might not have brought the big uptick in sales we’ve seen in recent months, preliminary data suggest that automakers took in record revenues, with the average transaction price of new cars, trucks and crossovers sold last month climbing by at least 4%.

All told, U.S. buyers spent a record $52 billion for their new vehicles in May, in part, due to a sharp, year-over-year decline in incentives, according to several firms that track monthly sales data. A separate study suggested that motorists are covering those higher costs by stretching their loans out longer than the industry has ever seen, an average 67 months.

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“New vehicle sector and segment preference indicates consumers are confident about the economy and their finances,” said TrueCar President John Krafcik. “Not only are these shifts to premium brands and utilities telling from an economic indicator standpoint, they signal sizable revenue gains automakers should reap this year.” (more…)

New Car Loans Getting Longer, Larger

Updated on-call app ties into tech wearables.

by on Jun.01, 2015

New car loans are longer and for more money than ever, according to Experian Automotive.

New vehicle sales are humming along in 2015 led, in large measure, because of the appeal of full-size trucks, sport-utilities and luxury crossovers: all high-ticket purchases.

A bigger price tag often means a bigger loan. To keep the monthly payment down, borrowers are extending their loan terms to 67 months on average: the longest term ever for new cars, according to Experian Automotive.

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The trend extends to used cars as well, which saw the average loan length extended to 62 months. Stretching out the loan to get a lower monthly outlay isn’t uncommon, but changing the parameters of loans would be of concern. (more…)

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…)

Automotive Loans at All-Time Highs

Rising new vehicle sales expected keep totals rising.

by on Feb.20, 2015

There are $866 billion outstanding vehicle loans in the U.S.: an all-time high.

Americans owe more money for new and used cars than ever: $866 billion, according to Experian Automotive.

That’s the outstanding loan balance for vehicles in the U.S. and not only have Americans borrowed more than ever for cars, the average length of new car loans is a record-high 67.2 months – almost six years.

It’s not entirely surprising as new cars are being sold for their highest prices ever, according to TrueCar.  The average transaction price for new cars in 2014 was $31,831. Next year it’s expected to surpass the $32,500.

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Also it’s well-documented that lenders have loosened up their requirements, which certainly played a role in the record loan number, but only in the sense that sub-prime and deep sub-prime buyers were give more loans – like everyone else. (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…)