Auto Market Shows Signs of Looser Lending
Feb 15th, 2012 @ 3:07 PM by Amber Nelson
The U.S. auto loan market is definitely reviving after hitting a low point back in 2008 with the financial collapse. While credit all but dried up at that time, banks have since shown much more interest in funding auto loans with banks even starting to compete against each other for business.
“Banks have had to look elsewhere for growth opportunities, and auto has been one of the nice spaces over the last couple years,” Curt Beaudouin, a bank analyst for Moody’s Investors Service in New York, said in a phone interview with Bloomberg . “The credit experience in terms of losses has been very good in recent times. It’s never gotten out of hand. Right now, it’s basically good for everybody in the industry.”
And it is starting to show in the numbers. U.S. sales of light-vehicles rose 10 percent in 2011 to 12.8 million. AutoNation Inc. is predicting that U.S. car sales will grow to 14 million this year.
Certainly looser credit has been a major factor in rising auto sales. Many lenders are trying to speed up the loan origination process to aid in sales.
“You’ve got pretty fast decisioning going on in the market,” Melinda Zabritski, director of automotive credit for Experian Automotive said in an interview. “When the market pulled back, the instant decisions really slowed down. You had more manual reviews. That’s one of the things you’re starting to see change is you’re going back to the automatic approvals. For a while, you really were only doing automatic declines.”
Capital One is one such lender that has created a program for faster approvals.
The company’s speed is “a big competitive advantage for us,” Kevin Borgmann, president of the McLean, Virginia-based lender’s auto-finance unit said in a phone interview. Capitol One decides “the majority of applications for any dealer that does business with us within 30 seconds. Dealers find a lot of value in that because they can go out and sell the next car.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.