Moody?s Tamps Down Concerns About Surge in Auto Loans

August 12, 2014
New York Times 
auto financing news
A new report from Moody's Analytics shows that even while the market for subprime auto loans may be bubbling, it likely will not burst.

The "rapid increase in auto lending volumes and loosening of standards" -- up more than 130 percent in the five years after the financial crisis -- have not led to higher delinquency rates, according to the report. Moody's notes that outstanding loan balances among subprime borrowers are below the 2007 peak, and prime borrowers have driven the recent growth in auto loans. The report calls banks "conservative" when it comes to lending, with just 10 percent of total loans going to borrowers with credit scores under 620.

Although the report indicates that consumers owe less money now than during the recession and can afford to take on more debt, Moody's is concerned about loans with longer terms -- which could encourage "consumers to choose more expensive cars and longer loans [leading to a] perilous situation for both borrowers and lenders."

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