A Green Light for Car Loans
Wall Street Journal
August 14, 2012
While banks and other lenders remain skittish about extending credit to home buyers, they are warming up to the vehicle finance market. According to the automotive division of Experian, the value of outstanding auto loans at the end of the second quarter was $725 billion, 5.7 percent higher than last year. More banks have told the Federal Reserve that they are loosening the qualifying criteria for new-car loans. Because auto loans span between three and six years, they are more attractive to lenders than long-term mortgages. Even lending to subprime borrowers was up about 1 percent over last year in the latest survey by Experian. The loans are often more attractive because most borrowers are likely to pay their car payments before their mortgages and because cars can be more easily seized by lenders than homes. The most recent Fed survey of senior bank-lending officers found more than 20 percent reporting they had relaxed standards for making auto loans in the past three months.
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