JIM HENRY

Who makes irrational loans? Not Me

Jim Henry is a special correspondent for Automotive News.

Readers of “The Family Circus” in the funny pages will recognize the naughty, invisible gremlins named Nobody, Not Me and Ida Know. When the parents ask who broke the lamp or who ate the cookies, the kids blame the gremlins.

Are the gremlins at it again in auto loans? Maybe they’re to blame for so-called irrational competition, presumably the result of lenders making unprofitable loans to gain market share.

Wall Street analysts began keeping a sharp lookout for irrational competition during the Great Recession and have continued since. That forces auto lenders to keep a sharp lookout, too.

On Wall Street, the worry has centered on growth in subprime lending. But at a conference in New York last week hosted by Morgan Stanley, some lenders said the toughest competition and the thinnest margins are in superprime, not subprime.

And most lenders say Nobody is guilty of truly irrational lending -- yet. Another thing they can agree on: If there’s a culprit, it’s Not Me.

You can reach Jim Henry at autonews@autonews.com

25

Shares

ATTENTION COMMENTERS: Over the last few months, Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Newsletters