It’s been more than two years since the credit cycle started turning. It was in late 2006 when there was a realization that credit had been too easy and that originations would slow and losses would rise. Two long years have passed without any positive sentiments for the future. Two very long years.
At the Auto Finance Summit this week, I felt for the first time since 2006 that the long downward momentum in consumer credit was finally turning around. I can cite several examples, but the one that sticks out most was Paul McCarthy’s presentation. Paul is a proud economist — Ford Credit’s senior economist, in fact. He presented a cogent and comprehensive view of the auto and auto finance markets to date. Then toward the end of his presentation he threw up this slide, and it made an impression on me:
The implication of the slide is, cars on the road today are getting older, and they’ll have to be replaced eventually. Never mind all the other positive factors in the market — the higher wholesale prices, the resurgence of the capital markets, the leveling out of credit performance — this slide said to me that the future is looking brighter for the auto and auto finance markets based on fundamentals alone. Lo and behold, the economist was upbeat, and I loved it.
I came home from the Summit charged about the future. Sure, there are minefields yet to be managed, but at least the prognosis for the future is not soundly pessimistic. The bottom line is, the vibe matters, and it was good.
