The auto lending shakeout is worsening as the pace of financier closings and curtailments quickens.
In the past week, newbie lender Sixth Gear Solutions Corp. shut down for lack of funds. Wells Fargo & Co. halted Canadian operations, and Citigroup has severely reduced originations.
In some ways, the crisis our sector is facing is similar to the mortgage meltdown that started two years ago. Vehicle sales are plunging while losses are climbing, a fairly dangerous combination. Couple that with credit markets that are totally stalled, and the outlook is pretty grim.
Back in 2006, the Mortgage Lending Implode-O-Meter started to keep track of companies that had “imploded.” To date, 304 major U.S. lending operations were counted. Will the numbers in auto finance reach that high? Not from a dollar perspective, certainly. And probably not strictly among lenders. But if you include dealerships in the tally, definitely.
The steeper our fall, the harder it will be to rise again.
