Although more than 75% of banks report no change in their auto credit limits, a “modest net fraction” of banks are reporting some tightening, according to the Federal Reserve’s October 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices.
A small group of banks — generally less than 10% — highlighted by the report indicated an increase of minimum credit scores for approved auto applications, widened spreads of loan rates over the cost of funds, and a decrease in approvals for consumers who don’t meet credit limits.
The survey — which gathers responses from 69 domestic banks and 21 U.S. branches and agencies of foreign banks — echos some of the tightening in the industry, which companies such as Consumer Portfolio Services, Ally Financial Inc., and Capital One Auto Finance have stated in recent earnings reports.
The downward trend is not yet evident in the numbers though, only 13% of banks reported credit standards for approved auto loans have tightened somewhat or considerably while 9.8% said standards had eased somewhat –only 5% of respondents reported terms and conditions tightening for auto loans.
However, consumer credit outstandings continue to rise, with 20% of banks reporting moderately stronger demand. Nonrevolving consumer credit outstandings — which includes auto loans but also mobile homes, vacations, and education — also increased by 6.06% in September YoY to $2.7 billion.
The Federal Reserve’s numbers and survey suggest banks don’t seem to be tightening as quickly as some auto lenders in the space, but outstandings are still on the rise and consumer demand is strong.