CARY, N.C. -

Ally Financial and Santander Consumer USA are just two examples of what Cox Automotive chief economist Jonathan Smoke said finance companies have been doing for the past four months amid the coronavirus pandemic.

Smoke said underwriting has tightened since April. Perhaps a reversal is not likely any time soon since the Labor Department reported on Thursday morning that initial claims for unemployment benefits rose for the second consecutive week, coming in at 1,434,000 and surpassing the 1-million threshold for the 19th week in a row.

The Labor Department did point out that the total number of people claiming benefits in all programs for the week ending July 11 was 30,202,498, a decrease of 1,601,699 from the previous week.

“The downturn has not fallen equally on all Americans, and those least able to bear the burden have been the most affected. In particular, the rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has upended many lives and created great uncertainty about the future,” Federal Reserve chair Jerome Powell said on Wednesday following a unanimous vote to keep interest rates unchanged.

No matter what the rate might be, finance companies do not appear to be booking every potential piece of paper that arrives in its underwriting department. Here is what Smoke wrote in a blog post on Wednesday following the Fed’s latest action.

“While credit remains available and has been supporting the recovery in retail vehicle sales, the composition of credit has been shifting towards higher credit tiers as lenders tighten standards and become more selective in which loan applications they approve. Likewise, even those with higher credit scores are seeing slightly higher rates and less beneficial terms than available in April and May,” Smoke said.

“The Fed’s actions have led to lower rates, and it looks like they will try to keep rates low,” he continued. “However, not everyone can get the lower rates, and credit tightening seems to be leading to modestly higher, not lower, auto loan rates. Combined with higher new- and used-vehicle prices, payments are likely to drift higher. Higher payments will limit the strength of demand and will likely remain this way as long as supply and credit conditions are tight.”

This week when Santander Consumer USA shared its second-quarter financial statement, chief financial officer Fahmi Karam explained how the finance company is approaching underwriting.

“I think it’s still prudent for us to take a cautious approach, similar to what we discussed, in April. We're seeing signs that things are improving. But there's a lot of signs that give us a lot of caution that, we should be very diligent in our underwriting,” Karam said.

“We mentioned this a few times. We have to appropriately price for the risk that we put on our balance sheet, and we have to monitor our risk-adjusted return,” Karam continued. “So for now, we still continue to be very cautious. We're going to be very disciplined in our underwriting approach and utilize all the different tools that we do to assess risk. I think you’ll continue to see that until we get further clarity on the market.”

Ally Financial chief financial officer Jennifer LaClair offered a similar anecdote when that company reported its Q2 performance earlier this month.

“Specifically, we increased manual underwriting in lieu of automated decisioning and adjusted our buy box across our riskiest credit segments. As we closed the quarter, we were pleased to generate higher year-over-year volume in June at an appropriate risk adjusted return,” LaClair said.

The credit availability for consumers with steady employment, solid credit histories and healthy income is even more pronounced, especially with offers made by captives.

According to the newest J.D. Power Auto Industry Impact Report, incentive spending per new unit retailed for the week ending July 26 was $4,230, an increase of $57 from the prior week. Analysts explained the week-over-week change stemmed mostly by supported lease and finance mix edging higher.

Despite rising take-rates for supported finance offers, J.D. Power also mentioned 84-month APR mix of all retail sales dropped 1.8 points to 6.5%, lower than pre-virus levels.