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A closer look at auto financing in 2016

Posted on Sunday, April 17, 2016 at 5:57:48 PM

U.S. auto sales have beaten plenty of expectations with a strong start in the early months of 2016, despite some bad winter weather. However, some analysts are concerned over the effect of rocketing leasing and lending levels. Due to competition among dealers and lenders, these concerns are certainly reasonable.

"Dealers have a variety of lending program choices to fit customer needs and credit situations," Home Loan Investment Bank AVP of Auto Lending Services Christine Dikdan explained. "Many of these lending programs are getting more aggressive to keep up with demand - think "The Jones's." It is a snow ball effect in and, using the "rocketing" term, what goes up eventually goes down - hopefully not as hard as the mortgage crisis we are still feeling the effects of."

Great rates and fast approvals are prevalent in the industry, making it easy for instant gratification among consumers. Many lenders look for new and innovative ways to get increased business for high-volume dealers offering them additional incentives and kickbacks.

"I think the outlook for auto financing will be strong and continue through 2016," Dikdan added. "Money is cheap and programs are easy. What could hamper the outlook will be increased delinquency and repossessions. If the percentages increase beyond acceptable limits, lending institutions (banks, credit unions, manufacturer direct lending) may be forced to adjust their lending programs."

The second quarter will likely be a telling one for the auto financing market.