-
Subprime auto originations have nearly doubled in recent years, which has led to warnings of a bubble. But the fears are overstated, especially for banks, which have made fewer loans to borrowers with the lowest credit scores, four New York Fed economists said.
August 14 -
Lengthening loan terms are cause for concern because they open lenders up to potentially larger losses if loans sour. But low delinquency rates on car loans suggest that such fears may be exaggerated.
July 1 -
Nonbank finance companies that pulled back during the recession are actively lending again eating away at banks' market share by offering ultralow rates and stretching out loan terms.
August 1 -
An Office of the Comptroller of the Currency emerging risk report said underwriting for indirect auto and leveraged loans is cause for concern.
June 25
Regulators have raised red flags about weakening credit standards in the auto loan business, but Capital One Financial Chief Executive Officer Richard Fairbank says those worries are overblown.
"I probably am a little bit less concerned about the auto business, and the auto industry, than some folks are," Fairbank said Monday at the Barclays Financial Services Conference in New York.
He acknowledged that increased competition among lenders is leading to looser loan terms, but said the industry is still normalizing after an extraordinary recession-era period in which numerous lenders left the market.
"What we are seeing now is a very natural regression toward the mean. I wouldn't really call it alarming degradation," Fairbank said.
"So the auto business overall is still in a pretty good place," he added. "But there's no doubt its direction is going toward the mean, and could easily crash through that and get on the other side."
Capital One, of McLean, Va., originated $5.4 billion of auto loans in the second quarter, 19% more than the same period a year earlier.
The Office of the Comptroller of the Currency has been
Fairbank acknowledged Monday that auto loans are carrying longer terms, but overall he said that underwriting practices are still quite strong.
He said that he's more concerned about commercial and industrial lending, arguing that the solid performance of business loans during the recession has led to increased competition among banks.
