Hints of an Auto Lending Plateau
These have been the best of times.
Auto lending over the past few years has hit new highs, buoyed by vibrant car sales. It would be tough to find an auto finance venture that hasn’t benefited from the strong SAARs in recent years.
As an example, by the end of last year JPMorgan Chase & Co. reported double-digit growth in auto origination volume. Combined, loan and lease originations at JPM hit $9.2 billion in the fourth quarter of 2015, up 14% from the previous quarter, and up 33% from a year ago. JPM was not the only one.
It has been a steady and steep increase in originations since 2009. By last year, overall originations among the 100 largest financiers grew at a 13.1% clip, to nearly $560 billion of loans and leases, according to Big Wheels Auto Finance data.
But the SAAR appears to have plateaued, dropping to as low as 16.69 million last June — and there are at least hints that auto lending has peaked, too.
The most recent suggestion comes from a small survey on Twitter by Auto Finance News. This quick survey was distinctly not statistically valid, but it offers something of an indicator for auto finance, nonetheless.
The survey, which appears below, asked about the trend in auto finance volume through yearend. The answer, in short: not higher.
How will auto finance volume trend through yearend?
— Auto Finance News (@AutoFinanceNews) August 12, 2016
This is in stark contrast to the previous few years, when auto lending professionals nearly unanimously forecasted higher originations.
These sentiments matter. Last month’s SAAR ballooned back up to 17.77 million units — a big number, historically — yet, there is evidence of pessimism. And with that hesitancy will be a tightening of underwriting criteria. If the medium is the message in media, the sentiment is the reality in credit. This is something to consider as the market heads into its fall planning season.
