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Demand for auto loans again weakened in the third quarter as banks’ auto credit standards remained unchanged amid tightened standards across credit cards.
Of 71 banks that reported auto lending trends in Q3, 32% stated that demand for auto loans was “moderately weaker” while 52% reported that demand remained “about the same,” according to the Federal Reserve’s October 2022 Senior Loan Officer Opinion Survey on Bank Lending Practices. Standards “remained basically unchanged” at 90.2% of respondent banks, the survey noted.
About 66% of banks reported that if the market enters a recession, standards for auto loans over the next 12 months would likely “tighten somewhat,” while 26% said standards would not be changed. Of the respondents, 17 banks do not originate auto loans.
Auto credit demand continues to decline in Q4, with the net percentage of banks reporting stronger credit demand landing at -28, compared with -15.7 in Q3 and -15.4 a year ago, according to the Fed. The percentage of banks tightening credit standards rose to 2 in Q4 compared with 1.9 in Q3 and -9.4 in Q4 2021.
