Monday, March 2, 2015

Subprime Auto Loans

Wells Fargo's announcement of a cap on its subprime auto loan business is puzzling (WF announced that subprime will make up no more than 10% of its auto portfolio).  I wonder if the real approach is more complicated - WF will tighten its underwriting standards in a way that is expected to limit growth in subprime loans.  And, to signal to competitors its expected price discipline, it stated the 10% cap (i.e., WF will draw the line around here for its underwriting standards - it is at about 10% today).

All of this could be bad news for auto sales and manufacturers (but good news for creditworthy buyers faced with a glut of unsold mid/low priced cars and hungry manufacturers).

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