Lenders strike balance between growth, discipline -- so far

NEW YORK -- The auto financing trends that supported higher U.S. car sales this year -- easier credit, more subprime lending and higher loan-to-value ratios -- should persist into 2013, but auto lenders are expected to stay relatively conservative.

That’s according to speakers at the Auto Industry Hot Topics Conference here last week, co-hosted by Standard & Poor’s Ratings Services and J.D. Power and Associates.

“The industry is healthy; it’s just that the definition of health has changed,” said Thomas King, senior director of the Power Information Network.

By that he meant the domestic automakers are more profitable at lower sales volumes thanks to higher transaction prices, lower incentives, less overcapacity and production driven by consumer demand.

In the same vein, auto lenders are also showing discipline on the financing side, analysts said.

Amy Martin, S&P senior director for structured finance ratings, said competition is growing in auto lending, especially subprime, but so far auto lenders have refrained from chasing volume for its own sake.

According to S&P, through Sept. 30, subprime auto lenders raised $14.7 billion this year to make new loans by selling bundles of loans in the asset-backed securities market, up from $9.4 billion a year ago.

Still, that’s way below the pace of subprime ABS sales of more than $20 billion for all of 2006, the ratings agency said.

“We haven’t seen competition become overly heated just yet. We haven’t seen it where credit is being sacrificed for the sake of growth just yet,” Martin said. “But we’re keeping our eyes open.”