Auto finance benefits from looser purse strings

Jim Henry is a special correspondent for Automotive News.

Here’s good macroeconomic news for the auto finance industry: The Federal Reserve Bank of New York says U.S. households have concluded a “deleveraging period,” a fancy way of saying households have quit spending less and saving more.

Instead, they are spending more and borrowing more -- including $105 billion in auto loan and lease originations, the highest amount in almost 10 years, according to the Fed. That marks 14 quarterly increases in a row, the Fed said.

Auto finance isn’t the only beneficiary of freer spending. Balances were also up for credit cards and student loans. Home equity lines of credit, which before the Great Recession were often used as a way to finance a new sedan or luxury crossover, are still an exception to the rule. The Fed said those volumes are still down.

Paying down debt and saving more were good things for household balance sheets. Some retrenchment was obviously needed when home prices came crashing down. But that deleveraging was a headwind for auto loans.

“Outstanding household debt, led by increases in auto loans, student loans and credit card balances, has steadily trended upward in recent quarters,” said Wilbert van der Klaauw, senior vice president and economist at the Federal Reserve Bank of New York, in a written statement last week.

“In light of these data, it appears that the deleveraging period has come to an end and households are borrowing more.”

You can reach Jim Henry at autonews@crain.com

ATTENTION COMMENTERS: 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.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.