Ford, Dealers Say Credit Access Helping Recovery in Auto Sales
New-vehicle buyers are having an easier time getting credit, signaling U.S. auto sales may continue to accelerate after last month reaching the fastest pace since the government’s “cash for clunkers” program, Bloomberg reported.
Federal Reserve data shows banks began easing consumer-lending standards in July, and the Fed’s loan facility program rejuvenated the market for securitized auto debt, said Ellen Hughes-Cromwick, Ford’s chief economist. Data from CNW Research shows improved sales for buyers with weaker credit scores.
“Credit has begun to ease for automotive in general,” Hughes-Cromwick said today in a telephone interview. “We should see consumer credit begin to evidence some recovery, but it is a slow go. I don’t think anybody is baking in some sizable cyclical uplift in the next 12 to 18 months.”
Auto retailers including Group 1 Automotive Inc. and CarMax Inc. have said credit is less of a setback now after tighter lending helped slow U.S. auto sales to 10.4 million deliveries last year, the lowest since 1982. Sales in September rose to a seasonally adjusted annual rate of 11.8 million, the fastest pace since August 2009, according to Autodata Corp.
That’s still less than the 16.8 million annual average from 2000 to 2007, as Americans defer big-ticket purchases amid weak consumer confidence and high joblessness. Payrolls fell by 95,000 workers last month, more than forecast in a Bloomberg survey of economists, as the unemployment rate held at 9.6 percent, according to Labor Department figures released today.
“Credit is certainly available to meet the consumer’s needs,” Peter DeLongchamps, a vice president at Houston-based Group 1 Automotive, said in a telephone interview. “For current sales levels to increase, we need additional showroom traffic.”
The share of new-vehicle sales to buyers with subprime credit rose to 9.9 percent in September, the highest since February 2008, according to consulting firm CNW Research.
Subprime buyers represented 6.8 percent of the new-vehicle market through the first nine months of the year, according to CNW. That’s up from 5.7 percent last year, while short of the 14 percent share in 2006, the data shows.
CNW, based in Bandon, Oregon, defines subprime borrowers as having a FICO score below 619. Fair Isaac Corp.’s FICO scores use variables including the number of credit inquiries and missed payments.
Ford Motor Credit Co., the finance arm of the Dearborn, Michigan-based automaker, sold $500 million of bonds backed by dealer payments last month and had a similar offering worth $1.13 billion in March with help from the Fed’s Term Asset- Backed Securities Loan Facility.
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