Automobile subprime lending jumps 60% in 2010

A contraction in credit has served as a firm pillar of support for those who still fear deflation is the biggest threat to the U.S. economy. It seems even that pillar is slowly but surely weakening. In “Behind a Rise in Auto Sales, Easier Credit“, the New York Times reveals that loosening credit standards and increased lending have helped boost auto sales over the past year. Michael E. Maroone, the president of AutoNation, is cited as claiming that increased credit was the most important driver of auto sales last year. The statistics from this detailed article are a vivid reminder of how fast consumer borrowing can recover under the right conditions.

Consider these statistics quoted from the article:

  • Sales of new cars rose 11 percent, to around 11.4 million, in 2010 and are off to an even stronger start this year.
  • More than 859,000 new cars were sold to consumers with a so-called subprime credit rating in 2010, a nearly 60 percent increase from the year before.
  • [The packaged consumer loan] market stood at $36 billion in 2008, during the throes of the crisis, but by 2010 it had bounced back to almost $58 billion. Bankers and analysts project that could rise by as much as 15 percent in 2011.
  • Over all, lending to subprime borrowers has risen to about 38 percent of the auto finance market, although it is still well below its precrisis highs when it made up nearly half of all loans.

As the NYTimes notes, “…the gradual expansion of credit in virtually every area except real estate is an important sign that the American economy is returning to health.” So while an obsession with housing statistics can mire one in deflationary blues, so many other corners of the economy are flashing much different signals.

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