Lenders Add Restrictions for Auto Loans

Sourced From: Wall Street Journal, April 2, 2008


Situation
1. Even as Fed cuts interest rates, getting tough for buyers to find attractive terms on auto loans
2. GMAC tightened lending standards 3 times in 2007
3. AmeriCredit and Sovereign Bancorp have recently raised minimum credit score
4. In 2008, 90% of auto-loan applications from prime borrowers approved, down from 92.5%
5. Among subprime applications, 57% have been approved in 2008, down from 68% early 2007
6. Delinquencies hit 10-year high in Jan, though they declined slightly in Feb


Significant Points
1. Many lenders making fewer loans; instituting stricter standards on loans they do approve
2. Often requiring higher credit scores, making smaller loans, bigger down payments
3. Some lenders applying tough standards for borrowers in states hard hit by housing crisis
4. Subprime borrowers will bear brunt of shifting lending standards
5. Even prime borrowers w/ good credit may be affected by some changes
6. Some consumers may not be able to get a car loan at all


Says
"We're trying to lend to people who will be able to pay us back." -- Thomas Kelly, spokesman, J.P. Morgan Chase & Co.'s Chase Auto Finance