ORLANDO -- Dealerships will continue to find that lenders remain unwilling to front as much money toward car loans as they used to, making sales of aftermarket products by the finance and insurance office a challenge.
That's the dim forecast from senior executives from top auto lending institutions who were interviewed this month during the National Automobile Dealers Association convention.
Lenders are "not advancing as much as they did in 2007 and 2008," said Tom Wolfe, president of Wachovia Dealer Services, which in March will be renamed Wells Fargo Dealer Services. "What's gone from auto financing is the exuberance of 2007. It's very rational."
The advance rate is the amount lenders are willing to lend toward a car sale. When financial institutions reduce advance rates, they are seeking to get more money up front in case the loan goes bad or is paid off early.
In a default, lenders typically incur the cost of repossessing and reselling the vehicle. When the loan is paid off early, they must refund some of the proceeds from products such as vehicle service contracts.