Banks Tightened Up On Car Loans

Banks Tightened Up On Car Loans

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Some of the country’s biggest banks have tightened up their standards for making a car loan significantly. They are viewing the drop in car sales in general as well as the decreasing price of used cars as a reason to be concerned.

Fox Business reported that Wells Fargo posted a 29% decrease in the number of car loan originations that they created. This was the largest decline in a given quarter in the last five years for that particular bank.

The car loan market in particular has dried up for those with the very lowest credit scores. The most risky borrowers have historically been a great market for the lenders to tap into. However, this is starting to change as they are pulling back on their lending activities in order to control their potential risks.

In recent years the car loan market has been extremely open to those who want to borrow. It has been accommodating to them because the banks wanted to get those loans out the door. They could see the big profits that would come in on a lot of loans and keep making those loans.

There have been record car sales in both 2015 and 2016, and this lead some to believe that there would be a slow down on the Stratton Car Finance market. That has happened, but the banks have also been hit by some losses by those who are not paying on their loans. At the same time there is a problem with declining values in used cars.

Lenders sometimes have to go and repossess vehicles that someone is not making their payments on. When they do this, they have to try to sell that vehicle at auction. It sounds simple enough, but the real problem is that the cars are declining in value quickly. This means that they take a bigger loss than what they otherwise would.

Even a prime car loan that ends up as a repossessed car can still only end up getting an average of about 51% of the original value at least in 2015. That is a dismal scenario for the bank that lends out that money in the first place. This is likely a big reason why the banks are now tightening up their standards to such a great extent.

Anyone who is interested in a car loan at this point should work on getting their credit score as high as they possibly can. Those with decent credit scores are the only ones who can legitimately expect to have any chance of getting the car loan that they desire.

Obviously, not all lenders are going to close up their doors just because there have been some less than ideal outcomes for some. That being said, as the market continues to get tougher to get into, borrowers must consider their options.

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