Banks Lower Car-Loan Standards image

Banks in the US began to loose the policy on offering people loans to buy new cars.

According to the credit-reporting firm Experian, at the end of the second quarter the value of auto loans reached $725 billion, up 5.7% compared to last year and the highest level since the first quarter in 2009. More and more banks announce the Federal Reserve that they are lowering their standards for new auto loans and therefore the market for securities has rebounded due to car loans.

“The banks are getting into auto loans because they have the money,” said Jim Lentz, U.S. chief executive at Toyota Motor Corp. ”We are seeing more ‘subprime,’ which is good.”

The surge in car-financing boosts the consumer economy, and since car loans are relatively small and spread over periods from 3 to 6 years, they are more appealing than mortgages. Even subprime loans, which are given to less creditworthy, have increased 1% from 2011. Experian has noticed that people tend to skip mortgage payments more often than the auto ones, as cars can be more easily seized by banks. In the second quarter the auto-loan payments 30 days past due decreased 2.52%, which would be the level seen in 2007.