dcsimg
   Facebook


rebuild.org finance news:

Back to Latest News Headlines

Cheap auto loans driving recovery?

[Nov 8, 2010.]

 

Auto loans make up much of current borrowing

On November 5, the Federal Reserve published its analysis of consumer borrowing in September. And once again it showed that auto loans are responsible for much of the borrowing that some say is leading the current economic recovery.

While revolving credit (which mostly comprises credit card debt) fell for the 25th consecutive month, non-revolving credit (auto loans mainly, but also those for mobile homes, education, boats, trailers, vacations and so on) jumped by more than $10 billion to $1,597.8 billion. That's just $5.8 billion less than its five-year high in 2008.

Auto loans industry thriving

The extent to which the auto loans sector is thriving can be seen from the performance of major players. For example, on November 3, Businessweek reported on Ally Financial Inc., which used to be called GMAC Inc. The bank said that it made a profit of $269 million in the third quarter of 2010, which compares with a $767 million loss during the same period last year.

Ally's auto loans division did particularly well. Its income last quarter was $756 million, up from $412 million a year before, and it originated auto loans worth $8.3 billion, up from $5.6 billion in Q3 2009.

Auto loans translating into auto sales

On November 5, Bloomberg showed how more freely available auto loans may be driving vehicle sales. It said that sales of light vehicles in September increased to an annualized rate of 11.73 million units, and that rising trend was reinforced in October when the annualized rate jumped again, this time to 12.3 million. That's the highest level since the recession hit in 2008, except for a period during the federal government's cash-for-clunkers program.

And Ford Motor Company, the nation's second biggest vehicle manufacturer, reported that its sales had leaped 41 percent in September alone. It's too soon to say whether figures like these contributed to the 151,000 jobs that the Labor Department reckons were added to America's payroll in October, but it surely must set a scene in which car makers, dealerships and lenders are all likely to consider hiring additional staff.

Is the time to act now?

Back on October 10, this blog raised the possibility that the current supply of cheap auto loans could dry up. The encouraging statistics quoted above suggest that this isn't happening yet, but they don't rule out the possibility of a drought sometime soon.

On November 5, The Wall Street Journal pointed out that issuances of asset-backed securities (ABS--the packages of loans that lenders bundle up and sell on to investors) so far this year were actually lower than they were during the same period in 2009. By November 4 last year, auto sector ABS packages worth $53.77 billion had been issued, while up to that date this year the figure was $50.95 billion.

Of course, this may mean nothing. But if you're thinking of buying a car, and don't want to take the chance on how things turn out, you can find competitive auto loan quotes here.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

news subscription:

Easily subscribe to the rebuild.org news feed.

Read our news without even visiting our site!

Feedburner
Subscribe to our news

 

news archive:

Rebuild.org monthly news archive