Although consumer bankruptcies are down nationwide from recent years, they are rising quarter by quarter. The outlook for credit losses and vehicle repossessions is getting worse for some auto lenders, both prime and subprime, companies say.
"Credit performance has become more challenging of late," said Dan Berce, CEO of AmeriCredit Corp. The Fort Worth, Texas, company specializes in lending to customers with poor credit.
"We have increased our provision for loan losses, and we are surgically tightening our exposure on new credit applications," Berce told industry analysts last month.
In the quarter that ended Sept. 30, AmeriCredit's net income fell 17 percent from the year-ago quarter, to $61.8 million. At the same time, the company's new loan originations grew 41 percent, to about $2.4 billion. The increase includes AmeriCredit's acquisition on Jan. 1 of Long Beach Acceptance Corp., representing about $272 million in loans.
The amount AmeriCredit set aside for loan losses in the quarter rose to $244.6 million from $173.9 million in the year-ago quarter.
Other lenders also are adding funds to cover potential loan losses.
Ford Motor Credit Co. says its charge-offs for credit losses grew to $139 million in the second quarter of 2007, compared with $102 million in the same quarter last year. The higher amount represented less than 1 percent of Ford Credit's loans and leases.
By contrast, GMAC Financial Services said its second-quarter credit losses on auto loans and leases decreased to 0.9 percent of retail contracts from 1.0 percent a year earlier.
Unlike other auto lenders, GMAC has a large stake in the subprime mortgage debacle. The company has responded by cutting back on the sector. In the second quarter of 2007, GMAC originated about $700 million in "nonprime" mortgages — down from $6.1 billion in the year-ago quarter.