Report Shows Auto Loan Industry Will Continue to Rise
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UPDATED: Mar 6, 2012
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Equifax and Moody’s Analytics joined together in a study of new U.S. consumer credit data from CreditForecast.com, and believe the auto market will continue its healthy rise throughout 2012, according to a press release.
“After spending recent years in financial doldrums, U.S. consumers are poised to make a comeback in 2012,” said Equifax Chief Economist Amy Crews Cutts. “The most promise we have seen has primarily been within the consumer spending and auto financing sector.”
Since the auto industry bailout, the nation’s largest car manufacturers have vastly improved. Auto loan originations have soared, and the delinquency rate is amongst the lowest when compared to other types of financing. Car loans have been demanded and been paid back with such efficiency that the average interest rate recently dropped to a four-year record low.
This record low interest rate is unlike the record lows seen in the mortgage industry since housing loans have low rates due to the poor performance of that market. Auto loans, however, yield low rates due to the automobile industry’s success.
Equifax and Moody’s believe the 27 percent increase in demand for car loans demonstrates momentum that will yield positive results through 2012.
Demand has grown because the auto industry continues to provide supply—something that’s grown more and more uncommon in the lending world.
Foreclosure, default, lost jobs, and underemployment have all negatively impacted credit scores, but the auto loan industry sees those factors for what they really are: uncontrollable. As a result, they have relaxed their lending standards and ventured into the world of subprime lending, which hasn’t been seen since the real estate boom of the early 2000’s.
By disregarding credit scores—or at least approving auto loans to those with lower-than-acceptable scores—the auto loan industry has successfully bolstered and propelled their market to the forefront of the lending world.