Auto Finance Industry Expected to be Hit Hard by Economy Downturn

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Eco­nom­ic down­turn and increased job­less­ness have hurt the auto mar­ket and result in more loan defaults. Cap­tive lenders (owned by automak­er) have already been rat­ed down, and it could hap­pen again based on com­pe­ti­tion results with for­eign makes for the decreased US mar­ket share. Non-cap­tive lenders who are reliant on auto loans will be hit hard­est.

Background
Cap­tive lenders are com­pa­nies such as Ford Motor Cred­it and GMAC which are owned by the domes­tic automak­er
Ford has $55.8B in retail port­fo­lio, GMAC $49.8B, Toy­ota $38.9B
Non-cap­tive indus­try is con­sol­i­dat­ing w/ top 10 grab­bing 26% of orig­i­na­tions in 2006, up from 14% in 1999
Lenders like Ameri­Cred­it that rely on cap­i­tal mar­kets for fund­ing and its focus on high­er-risk sub­prime bor­row­ers are most sus­cep­ti­ble




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