US banks tighten lending as auto loan defaults surge
Automakers dependent on cheap credit forced to boost discounts and cut production
A surge in auto loan payment delinquency has forced banks to tighten lending practices, according to the New York Fed’s quarterly report on household debt and credit, reports Bloomberg.
Car loans for subprime borrowers fell to lowest level in two years at US$25.9 billion. The subprime category accounts for less than 20% of new loans, down from 30% ten years ago, while share of auto debt more than 90 days overdue reached 3.82%, the highest level in four years.
Senior Bloomberg economis Yelena Shulyatyeva said the tightening “is a big impediment to future strength in auto sales,” adding that “a lot of this demand was driven by loose lending standards.”