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

Photo of gray SUV plugged into public electric-vehicle charger in parking lot
Industryby Hannah MitchellJuly 21, 2026

World EV Adoption Set to Grow

A new report says the segment, despite recent setbacks in some regions, is poised for acceleration as many countries look to reduce pollution.

Read More →
Bar chart of truck and SUV segments' weekly value change
Industryby StaffJuly 21, 2026

Black Book: Weekly Market Update

Wholesale automotive auction business stayed steady last week as bidders encountered lower prices, analysts observed.

Read More →
laptop with blue car on screen on a shopping website, Clear Costs Convert
Industryby Lauren LawrenceJuly 21, 2026

Pricing Transparency Drives Purchase Consideration

An annual study by JD Power found that clear pricing matters to consumers on automaker websites, so much so that it increases their purchase consideration.

Read More →
Ad Loading...
Bar graphic of used-car segment weekly change
Industryby StaffJuly 14, 2026

Black Book: Weekly Market Update

Used-vehicle market depreciation was the prevailing story in the wholesale market last week.

Read More →
Light-blue Fiat car parked on a sunny Chicago street
Industryby Hannah MitchellJuly 14, 2026

Smaller Is Looking Better

A growing number of Americans in the market for a new vehicle are opting for more affordable options, not waiting for market stability to bite the bullet.

Read More →
man sitting at desk using calculator with charts in front of him, to-go coffee cup on desk, rising and falling data chart in front
Industryby Lauren LawrenceJuly 14, 2026

U.S. EV Market Slowly Stabilizes

U.S. electric-vehicle interest is slowly stabilizing since a major dip in sales after last year's end of the federal EV tax credit, and hybrids remain the leading electrified power train.

Read More →
Ad Loading...
blue background, map of the world with connecting lights and an electric vehicle emblem in the middle
Industryby Lauren LawrenceJuly 8, 2026

Global EV Market Entering New Phase

Automakers are making investments to lower battery costs and optimize production to meet changing consumer needs.

Read More →
Bar chart showing week-over-week wholesale automotive price change
Industryby StaffJuly 7, 2026

Black Book Weekly Market Update

The holiday weekend, not surprisingly, put a drag on wholesale automotive activity last week, analysts observed.

Read More →
Photo of Honda CR-V SUV on two-lane road next to roadside trees
Industryby Hannah MitchellJuly 1, 2026

Auto Affordability in Context

Cox Automotive points out the complex circumstances that have led to eye-popping vehicle prices.

Read More →
Ad Loading...
Line chart of used-vehicle days to turn over past week
Industryby StaffJune 30, 2026

Black Book: Weekly Market Update

Automotive auction inventory increased last week, giving choosy bidders even more leeway.

Read More →