On countless occasions in recent years, the U.S. auto industry has relied on cheap and easy credit from Wall Street to get it through rough patches.
Not this time.
With both bad loans and interest rates on the rise, financial institutions are becoming more selective in doling out credit for new-car purchases, adding to the pressure for automakers already up against the wall with sliding sales, swelling inventories and a used-car glut. “We’ve been having a party for a few years and it was fun,” said Maryann Keller, an industry consultant in Stamford, Connecticut. “Now lenders are getting back to basics.”
Many figure they have to. For one thing, subprime borrowers have been falling behind on their car-loan payments at a rate not seen since just after the 2008 financial crisis. Delinquencies for auto debt of all stripes have been climbing, with the value of those behind for at least 30 days swelling to $23.3 billion in December, a 14 percent jump from a year earlier, according to the Federal Reserve.
This helps explain why 10 percent of senior bank-loan officers said they expect to pull back on extending credit to car buyers this year, according to a Fed survey. Expectations are that terms will toughen for loans the vast majority of Americans need to buy new vehicles as the Fed boosts benchmark rates…
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