Manheim Calls Credit Markets Better, Not Normal
ATLANTA — Apparently, many consumers still feel they are unable to get loans, despite the fact that lending has picked up, according to latest analysis from Manheim Consulting.
Late last week, the company shared its take on what is occurring in the auto loan arena.
"In the financial markets, rates are low and the yield curve is steep. That's a prescription for better credit flows, and indeed, lending has picked up. Additionally, secondary stock offerings (such as Ford) raised $34 billion in the first two weeks of May," company officials reported.
"Despite this thawing in the credit markets, many businesses and consumers feel left out in the cold. The Federal Reserve Board's survey of lending officers shows a further tightening in auto loans, just less dramatically than in recent quarters. The TALF program has enabled several large auto securitization deals to get done, but of course, that remains just for prime paper. Subprime lenders continue to shrink their loan portfolios," they continued.
Looking at GMAC/Chrysler Financial, the company said it remains to be seen whether the combined entity will be "a looser lender or a tighter one."
"It depends, of course, on future capital standards, loss ratios and the degree of government backstopping. Given the significant reduction in the dealer network that will occur, there is certain to be a period of turmoil and the cutting of credit lines for many dealerships," Manheim explained.
While GMAC retail loan originations grew in the first quarter, Manheim compared this to the "exceptionally low level of lending that was done in the fourth quarter."
Basically, GMAC provided retail financing for 17 percent of its North American sales for the first quarter, down from a 49-percent share in the same period of last year. Moreover, GMAC financed 33,000 used-vehicle retail contracts for the quarter, down from 133,000 a year ago.
Ford Credit, on the other hand, saw its retail financing share ease from 37 percent to 31 percent.
"Although credit unions and regional banks have picked up some of the slack left by the pullback by the domestic captives, that shift appears to have played out," executives noted.
"Of particular concern will be the regional banks that, in addition to auto loans, rely on commercial real estate lending. Losses on commercial mortgages are destined to rise sharply over the next year. That will put a restraint on the other lending done by the regional banks," they concluded.