Few Banks Tightened Credit Standards for Auto Loan Approval, Fed Finds

Tighten RopeSeveral large auto lenders reported elevated delinquencies and losses in the fourth quarter, but only 13% of banks surveyed by the Federal Reserve have tightened credit standards for approving auto loans.

Meanwhile, 85% reported standards remained “basically unchanged,” while, on the bright side, no respondent reported loosening standards, according to the Senior Loan Officer Opinion Survey on Bank Lending Practices results, released Monday.

That is a slightly higher percentage than a reported tightening on approvals for loans other than credit card and auto though: 6.3% reported standards had tightened, versus 90.6% reporting unchanged standards – 3% eased standards somewhat.

“Furthermore, modest net fractions of banks reported requiring higher down payments for auto loans and decreasing the extent to which credit card and auto loans are granted to some customers that do not meet credit scoring thresholds for such loans,” the Fed wrote in its results summary.

Four of the 59 banks that were surveyed reported higher down payments were required, while the rest left down payments the same. The most movement was seen in regards to the banks’ spreads of loan rates over cost of funds, where 18.6% reported somewhat higher spreads, while 5% reported somewhat narrower spreads — 74.6% reported no change.

“Banks, on balance, reported weaker demand for most consumer loan categories during the fourth quarter. Specifically, a moderate net fraction of banks reported weaker demand for auto loans, whereas a modest net fraction of banks reported weaker demand for credit card loans,” the Fed wrote. “Banks reported that demand for other consumer loans remained basically unchanged on net.”

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