Auto loan demand softer, banks pickier, Fed says

Auto loan demand at banks has softened while approval standards have tightened a bit, according to the latest Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

"A modest net share of banks reported tightening lending standards on credit card and auto loans, whereas standards on other consumer loans remained basically unchanged," the Fed said in the report, published July 31.

The survey, taken in July, was based on responses from 76 domestic banks and 22 U.S. branches of foreign banks. The previous survey, taken in April, was published May 8.

In questions relevant to autos, there were some changes on the margins in the latest survey but no drastic moves. As the Fed noted in its summary, the general direction of the responses was toward tightening as opposed to easing credit standards and toward less demand rather than more, but the detailed results were more mixed, especially compared with the April survey.

For example, loan officers were asked to describe demand from individuals or households for auto loans. In the July survey, 72.3 percent said "about the same," 18.5 percent said "moderately weaker" and 9.2 percent said "moderately stronger."

In the April survey, only 3.3 percent of loan officers said "moderately stronger" when asked to describe auto loan demand, so the July survey (at 9.2 percent) was an improvement. However, in April only 13.3 percent said "moderately weaker" when describing demand, so that number rose (to 18.5 percent) in July. In the April survey, 80 percent said "about the same" when describing demand vs. 72.3 percent in July.

Some responses were significant for what the loan officers didn't say. For instance, respondents do not seem to be reining in loan terms. In response to a question about their bank's "maximum maturity" on auto loans, 95.3 percent said "basically unchanged"; just 1 percent said "tightened somewhat." That was no big change from the April survey.

Some responses implied there could have been an earlier round of tightening at some banks, which provides some context for the July responses.

With respect to "minimum required credit score," 92.2 percent of loan officers responded "remained basically unchanged," 4.7 percent said "tightened somewhat" and 3.1 percent said "eased somewhat." None said "tightened considerably." In April, 1.7 percent said "tightened considerably" and none said "eased somewhat."