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Auto financing options dwindle in credit crunch

November 16, 2010

The U.S. mortgage crisis and a resulting credit crunch have put a crimp in auto financing, too, as consumers with weaker credit find it harder to get loans, lenders and auto dealers say.

 

But even car buyers with excellent credit may see their choices of lenders dwindle as independent banks and finance companies scale back on the car loans they’re willing to make.

 

Taking up the slack for many dealers are the so-called captive-finance units, basically loan operations run by the automakers themselves to help their dealers finance new-car purchases.

 

For consumers, the rougher lending landscape could mean they’ll have to make bigger down payments, pay higher interest rates or choose a used car over a new model to cut costs.

 

"In the past four to six months, the overall credit markets have tightened, and funding availability is becoming tougher," said Steve Lambert, president and chief executive officer of Nissan Motor Acceptance Corp., the lender operated by Nashville-based Nissan North America Inc.

 

"What we’re seeing is some of the subprime lenders struggling to gain funding, and they are backing off in their auto lending," he said. "As a result, we are seeing more of the customers who typically would not be coming to a captive-finance source."

 

The catch is that Nissan Motor Acceptance and most other captive lenders aren’t set up to handle a large number of subprime customers, and some would-be borrowers are being turned away.

 

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