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Big winner from the summer’s record auto sales: Big banks

November 22, 2010

The thousands of new-car buyers who have responded to the domestic carmakers’ employee-price-for-everyone promotions this summer have been a boon to the factories, whose discounts successfully lured shoppers into showrooms. 

Reaction to the promotions among dealers has been somewhat mixed. But the real winners in the sizzling U.S. car market are the banks and captive finance companies that put up the money to finance those sales.


Bankers are seeing dramatic increases in auto loans, which can make up to 15 percent of their total loan portfolios, according to a report in the Atlanta Journal Constitution. 

Wachovia, for example, reported that auto loan volume rose 28 percent nationwide in June. Officials for Atlanta-based SunTrust Banks, the nation’s fourth-largest auto lender among banks, said auto loan volume jumped 30 percent in July, the best showing in 18 months.


An executive at SunTrust said he expects the loan trends to continue even if there is a slowdown in auto sales. 

That’s because Detroit automakers did away with the zero percent financing that was so popular two years ago.


"One of the key reasons banks are seeing better loan volume is that the big auto companies cannot be aggressive on loan pricing, since they saw credit ratings cut back," said Christopher W. Marinac, a banking analyst with FIG Partners in Atlanta. "Lower credit ratings mean higher cost of debt when Ford and GM issue debt securities. So, the banks are now seeing better volume."