The economic chaos and financial crisis that pushed Lehman Brothers into bankruptcy has toughened new-vehicle loan terms and may further lower auto sales, reports Bloomberg.
"The panic over fuel prices brought the quickest shift from trucks and SUVs to cars I’ve ever seen," said Dave Zuchowski, vice president of sales for Hyundai Motor’s U.S. unit. "The new story is access to credit. That will impact us more in the second half."
A Lehman report, issued last month before the company’s collapse, estimated that tighter auto-lending standards in the second half may cut sales by as much as an additional 10 percent.
GM CEO Rick Wagoner said this week that consumer financing is now "much tighter" and urged the Federal Reserve to cut interest rates. The Fed ultimately decided to leave the rate unchanged.
"Our biggest problem is credit," Chrysler President Jim Press told reporters on Sept. 2.
According to the Federal Reserve Board’s July loan officer survey, the willingness to make new consumer loans was 22.3% lower than the previous period. Banks are requiring bigger down payments for auto loans and higher FICO scores. Throw into the equation those who are sitting on a trade-in vehicle that has a lower value and it all equals fewer qualified buyers.
It seems drivers will just have to hang onto their current cars a few years longer, until the economy gets better or until consumers have more money saved to put down on a new car and better credit scores.