Auto finance growth expected to boost car sales into 2015

Photo credit: BLOOMBERG

The growth in U.S. auto sales has slowed but a healthy auto loan and lease environment should continue to support higher sales the rest of this year and next, Moody’s Analytics says.

Auto finance growth “appears quite sustainable and reasonable given the broader economic context,” Cristian deRitis, a senior director at Moody’s Analytics, said Tuesday during a webinar for Consumer Bankers Association members.

Moody’s Analytics expects the seasonally adjusted annual rate for U.S. light vehicles to increase to nearly 17 million by the fourth quarter of 2015. Through August, U.S. light-vehicle sales were about 11.2 million, up 5 percent from the eight-month period a year ago, according to the Automotive News Data Center. At the end of the second quarter, sales were on pace to reach 16.2 million vehicles by year end.

Subprime outlook

DeRitis said there’s still a lot of pent-up demand to replace older vehicles that didn’t get replaced during the recession and its immediate aftermath. He added he’s not worried about a recent uptick in delinquencies for customers with subprime credit, although he said that trend in subprime should be monitored.

“The profile of subprime borrowers may be somewhat different,” deRitis said. “Borrowers with low scores may have those low scores as a result of the housing collapse and the foreclosure boom. These are buyers that have otherwise very good credit. ... They may be borrowers who are good to lend to, borrowers who will pay on time. ... I think there is difference between today and what we saw at the height of the housing boom back in 2006.”

Healthy environment

DeRitis said historical data doesn’t support media reports that caused a stir in August, which suggested parallels between the subprime mortgage boom that preceded the recession and the present growth in subprime auto loans. He made similar statements in August.

So did credit bureau Equifax, which hosted the webinar for the bankers association. During the webinar, Lou Loquasto, automotive finance leader for Equifax Automotive Services, also dismissed talk of a bubble in subprime auto lending.

“As much as some might want to write about lenders getting overly aggressive,” Loquasto said, “Equifax believes, and the data supports, there isn’t anything other than a healthy, rational auto lending environment right now.”

You can reach Jim Henry at

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