Credit Crunch Dinging Dealers
Two weeks ago to the day, Frank Williams provided a heads-up on the impact of the coming credit crunch on new car sales. Automotive News [AN, sub] now reports that some small regional banks have stopped making loans through auto dealerships. Even the big boy’s auto loan departments– Chase Auto Finance, AmeriCredit Corp., Wells Fargo Auto Finance, Mechanics Bank and Sovereign Bank– are reining-in their metaphorical horns. And that’s led “many would-be consumers to buy cheaper models, or purchase a used vehicle instead. If customers with shaky credit can get loans at all, often they must make a bigger down payment, pay higher interest rates and accept loans of shorter duration.” And here’s the kicker: “Consumers with subprime credit ratings buy nearly 30 percent of all new vehicles.” Oh wait, that’s not the kicker. This is: “Dealers are more dependent than ever on automakers’ captive lenders. The captives appear more willing than independent lenders to make subprime loans in what is shaping up as the worst year in a decade for new-vehicle sales.” Which will be true (the loan part) right until it isn’t. And if GMAC goes down, look for all Hell to break loose. Â