By BRYCE G. HOFFMAN
DETROIT -- Despite a $700 billion bailout, the nation's big banks are not in any rush to get back into the automotive lending business -- more bad news for an automobile industry struggling to rebound from some of the worst sales in decades.
The federal government's bailout of Wall Street was supposed to get America's credit markets moving again, but experts say they have been slow to loosen their purse strings.
"I haven't seen any impact yet," said Melinda Zabritski, director of automotive credit for Experian's automotive group. "We're starting to see a little bit of a loosening, but it has not been significant."
One Wall Street source told The Detroit News that some banks have decided to remain on the sidelines, waiting to see how the car market shakes out over the next several months -- despite having received billions in taxpayer dollars to get the credit channels moving again.
That is likely to keep car and truck sales from rebounding, said analyst Erich Merkle of Crowe Horwath in Grand Rapids.
"As long as lending standards remain tight, you're not going to see vehicle sales coming back," he said. "They're going to remain depressed until lenders start to relax their standards."
Many lenders are only willing to underwrite deals for consumers with perfect credit. And while some automakers like Ford Motor Co. and Toyota Motor Corp. continue to offer loans and leases through their in-house consumer finance arms, the fear of being turned down is keeping many potential customers out of showrooms.
That helped make October one of the worst sales months in recent history.
U.S. auto sales plunged last month to their lowest level in decades, deepening the industry slump and prompting carmakers to renew their pleas for government aid.
Car and truck sales slid 31.9 percent from prior-year levels to 838,156 vehicles, despite measures by the government to stabilize the economy and financial markets. That was the lowest total since January 1991, according to Autodata Corp.
On Tuesday, Moody's Investors Service issued a report on the auto finance sector that warned that lenders are still grappling with increased delinquencies, bigger losses because of slumping used car values and higher funding costs because of the continuing credit crunch.
"The sector is clearly under severe stress," said Curt Beaudouin, a vice president and senior analyst at Moody's. "Banks would like to exit the market, but there are no willing buyers for their auto operations. So, banks are withdrawing from the business by slowing originations and winding down portfolios."
Experian's Zabritski said banks have seen a big increase in delinquency rates in their auto portfolios. According to her data, their 30-day delinquency rate was up 12 percent in the second quarter. A total of nearly 532,000 bank customers were a month behind on their car payments, representing more than $3.5 billion in delinquent loans. Their 60-day delinquency rate is up 9 percent, with more than 85,000 car loans worth more than $1 billion two months past due.
"Buyers have simply bought 'too much vehicle,' thereby increasing their debt burden. Auto lenders were enablers in this process by offering increasingly aggressive financing terms and exposing themselves to increased severity of loss," Beaudouin said, adding that those bad bets are now being called. "Clearly, deteriorating U.S. economic conditions are taking a toll on the consumer, the used car market, new vehicle sales and lenders' asset quality."
Many dealers insist that they can still get loans for qualified customers, but some say the dearth of lenders has forced them to turn customers away.
Zabritski's research shows that loans are still readily available for customers with high credit scores, but are getting more difficult to secure for those with lower ratings.
"We're still seeing a lot of lending in the prime universe," she said.
