Who said that financial companies weren't providing credit to U.S. consumers anymore?
When it comes to auto loans, the credit spigot appears wide open, thanks to voracious demand for auto-loan backed bonds.
“We had such limited access to funding last summer, we almost were trying not to make loans,” said Dan Berce, chief executive officer of Fort Worth, Texas-based lender Accredit Corp. “Early this year, we looked at how loans were performing in Texas, California and much of the Northeast and liked what we saw, so we decided to lower the bar.”
About $22.9 billion in bonds backed by auto loans, borrowings for dealer inventory and related debt were issued through April, according to data compiled by Bloomberg. That’s a 67 percent increase from $13.7 billion a year earlier.
It's good news for auto manufacturers, which in April are enjoying the best annual sales growth in 26 years, but let's be careful what we wish for.
Bloomberg describes a woman with $5,000 of debt on her credit card, who still owed $8,300 for a past auto loan. She received just received $15,500 to buy a new car.
Americredit just achieved its first succesful auto-loan-bond sale without Federal Reserve support, but one can imagine that they assume government support will be provided in the future again should things go belly-up. Thus through thick and thin they can simply sell bonds with government help, then use the money to lend out and earn adiditional income.
Read more: http://www.businessinsider.com/subprime-lenders-already-slashing-standards-to-pump-auto-sales-2010-5#ixzz0oZXoLXZc
Disclosure: No Positions