P&A Providers & Administrators
MenuMENU
SearchSEARCH

Industry Reacts to S&P Downgrade

August 11, 2011
3 min to read


Chris Stinebert, president and CEO of the American Financial Services Association (AFSA), said it’s too early to know the full impact of the S&P’s downgrade of U.S. debt, especially with the Dow Jones Industrial Average switching between big gains and losses each day this week. His concern is what the actions taken by Standard and Poor’s last week, coupled with turmoil on Wall Street and in Washington, D.C., will do to the still-jittery consumer psyche, according to F&I and Showroom magazine.


“We don’t expect the downgrade to have a major impact on the auto finance industry,” said Stinebert, who noted mortgage rates dropped even during Monday’s turmoil on Wall Street. “Our biggest concern is the downgrade’s impact on consumer confidence, which could cause consumers to delay buying vehicles. It’s a little early to tell the full impact, especially since the markets bounced back on Tuesday.”

Ad Loading...


The markets, however, whipped back the other way on Wednesday, with the Dow dropping 519 points after jumping 429 points on Tuesday. That was after the Dow dropped 634.76 points on Monday, the worst point decline in more than 100 years.


As of early morning Thursday, the Dow had increased more than 200 points following a positive report from the U.S. Department of Labor. It showed the number of claims for unemployment benefits fell by 7,000 from July to a four-month low.


Stinebert said the association wasn’t surprised by the S&P’s actions. The 105-year-old ratings agency had been warning about its potential downgrade. What’s encouraging, he added, is that Moody’s and Fitch Ratings maintained their AAA rating of U.S. debt, and U.S. Treasuries remain strong. “The quality of auto finance has been strong and the underlying assets are well understood. Over time, rates will go up, but only as the economy improves.”


That was the message the Federal Reserve sent on Tuesday when it said it would hold short-term interest rates near zero through mid-2013 to prop up the credit markets. Whether that will help boost consumer confidence remains to be seen, especially since the Fed did not announce any new measures to stimulate growth.


On Monday, Bandon, Ore.-based CNW Research reported that its Jitters Index experienced the largest month-over-month increase since the firm introduced the metric in 1996. It jumped 6.9 percent in the first seven days of this month vs. July and 5.5 percent vs. August 2010.

Ad Loading...


Research firm Consumer Edge Research reported on Wednesday that its Interim Consumer Economic Index dropped 8.5 points from July’s full-month reading of 55.4. One analyst for the Stamford, Conn.-based firm said the steepness of the drop could mean that confidence among high-end consumers is weakening.


Edmunds.com, however, said on Wednesday that the stock market turmoil and decreased consumer confidence had yet to impact car sales. It reported that new-car sales in August were tracking at a 12.1 million-unit year. That projection, however, includes fleet sales, which are typically strong in August.


“The downgrade of U.S. debt has not negatively affected car-buying conditions,” said Lacey Plache, Edmunds.com’s chief analyst. “While the risk to new-vehicle sales from falling consumer confidence is undoubtedly higher as a result of the downgrade, favorable buying conditions — increased vehicle availability, increased incentives and continued low interest rates — should offset much of the debt downgrade’s effect on consumer confidence.”


The AFSA’s Stinebert added that he doesn’t expect the downgrade to impact the ability of finance sources to access the asset-backed securities (ABS) market for funding, which has been key to the recovery of the auto finance industry.


“The performance of auto ABS has been very good; the collateral and returns for investors have been good,” he said. “Investors are searching for yield and auto ABS has been fertile.

Ad Loading...


“We’ll keep close watch on showroom traffic,” he added. “This time of year is typically busier with the introduction of new models.”

More Industry

Kia Niro SUV in gold color parked outdoors
Industryby Hannah MitchellSeptember 1, 2026

Kia Closes Out Summer With a Bang

Its U.S. subsidiary broke multiple records in August, in part due to a surge of demand for hybrids models.

Read More →
Outside of Auto Park Ford dealership
Industryby Lauren LawrenceSeptember 1, 2026

Indiana Dealership Changes Hands

A 30-year-old Ford dealership in Indiana has a new owner and will soon be undergoing renovations to meet manufacturer requirements.

Read More →
Three men standing in front of two classic cars handing off gift.
Industryby Hannah MitchellAugust 25, 2026

Texas Dealership No Longer in the Family

The Ford store, a longtime cornerstone of the Houston market, is now part of one of the fastest-growing U.S. auto groups.

Read More →
Ad Loading...
Outside of modern car dealership “Genesis of San Bruno
Industryby Lauren LawrenceAugust 25, 2026

Genesis Grows California Presence

The Cardinale Automotive Group opened its third Genesis rooftop in the Golden State, Genesis of San Bruno, a stand-alone dealership serving the San Francisco Bay Area.

Read More →
Red Honda Civic hybrid sedan on two lane road with green hills in background
Industryby Hannah MitchellAugust 21, 2026

August Auto Sales a Mixed Bag

An early forecast shows strong business despite consumer hurdles, and hybrids are a big piece of their affordability coping strategy.

Read More →
EV charger inserted into dark-colored car port
Industryby Hannah MitchellAugust 18, 2026

EV Market Humming Along

July sales show steady growth as the segment stabilizes from last year’s artificial surge following pullback of federal support.

Read More →
Ad Loading...
car in background with hand giving a thumbs up in front
Industryby Lauren LawrenceAugust 14, 2026

Auto Loan Delinquency Rates Stabilize

Auto loans are a main driver of nonmortgage consumer debt, but delinquency rates stabilized in the second quarter across all credit risk tiers.

Read More →
blue sky, yellow and orange rollercoaster with riders going up an incline
Industryby Lauren LawrenceAugust 12, 2026

EV Sales Recover in Q2

The EV sales roller coaster continues as numbers show improvement, but industry experts predict a year-over-year third-quarter decline and fourth-quarter jump.

Read More →
Photo of blue Toyota Prius parked next to body of water with city skyline in background
Industryby Hannah MitchellAugust 5, 2026

The Cheapest Hybrids to Fuel

The powertrain is increasing in popularity, in no small part due to its fuel economy. A new report lists the most efficient hybrids on the market.

Read More →
Ad Loading...
white SUV parked in front of a body of water with a gray sky background
Industryby Lauren LawrenceAugust 5, 2026

Hybrids and SUVs Gaining Ground

The most recent Kelley Blue Book Brand Watch found that only two nonluxury brands increased in shopper consideration, buoyed by their hybrid and SUV offerings.

Read More →