Smart Borrower Blog

Is the Auto Lending Industry on the Mend?

Jan 6th, 2010 @ 10:36 PM by Amber Nelson

Buyers with poor credit are still being priced out of the auto loan market, but with the help of government money, the car loan industry is seeing some signs of life.

The Associated Press says that car and light truck sales for December are expected to have reached about 1 million, the highest sales figure since August’s Cash for Clunkers boom. Total sales for the year, however, will likely be around 10 million, the lowest number in 30 years.

Another positive sign is that lenders created 5.5 percent more car loans in the third quarter of 2009 than the previous quarter, and the fourth quarter promises to show another increase as December auto loan approvals moved upward for good credit buyers.

And contrary to what credit bureau TransUnion said a few weeks ago, the AP says that the government’s Term Asset-Backed Securities Loan Facility (TALF) program is helping to make auto credit much more available. With this initiative, investors can borrow money from the Federal Reserve to buy up car loan debt from lenders. With the burden of carrying loans off their shoulders, lenders are free to create more loans. As proof that this program is working, the AP says that:

“financial institutions raised more than $19 billion by selling securities made of bundled auto loans in the third quarter last year. That’s up nearly 60 percent from the second quarter and more than sixfold from the same period in 2008, according to the Securities Industry & Financial Markets Association.”

Still, TALF is set to expire in March, after which lending could tighten up significantly again. Of course, lending is still extremely tight for buyers with less than perfect credit. So although there are signs of life in the auto lending business, a full recovery still seems distant at this point.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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