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Posts Tagged ‘subprime auto 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.

The Journal of Record!

“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…)

Auto Loan Delinquencies on the Rise

Leasing, longer-term loans on the rise in U.S.

by on Feb.26, 2016

Fitch Ratings is warning that the subprime delinquency rate is on the rise.

Even with sales booming, the auto industry got another warning about easy credit as Fitch Ratings reported that delinquencies on U.S. subprime auto-related asset backed securities have reached a level not seen since the 2008-2009 recession.

The underperforming loans, which have been bundled into securities sold to investors, come from recent vintages driving the increase, according to Fitch. A recent report from Experian also noted rising level of delinquencies in car loans.

Picking up on the Trends!

Earlier this week, analysts from J.D. Power & Associates, while predicting strong sales for February, noted consumers are opting for leasing and long-term loans at record levels. So far in February, leases and loans of 72 months or longer combined to represent 65.1% of all retail sales, a record level for any month. The previous record was set in January 2016 at 64.3%, according to John Humphrey, J.D. Power & Associates top analysts. (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.

A Real Performer!

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…)

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.”

(more…)