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NADA rebuts New York Times editorial

August 15, 2014
An Aug. 8 editorial in the New York Times, "When a Car Loan Means Bankruptcy," has been decried by the NADA as "an unfair and unfounded attempt to portray the auto lending industry as a hotbed of deceptive practices and a harbinger of insolvency that could trigger another recession."
NADA President Peter Welsh noted that auto loan defaults are at historic lows — less than 1 percent in June. 
The Times editorial expounded on an investigation by the paper’s reporters that found "a disturbing account of how dealers and lenders work together to fleece vulnerable buyers." They noted some loan interest rates as high as 23 percent and income and employment information that was falsified to qualify low-income customers for loans they could not afford.
Welsh responded: "Before demonizing such a valuable and consumer-friendly system, check the facts: 
• During the Great Recession, auto loans were one of the best performing asset classes. Auto loan default rates never went higher than 2.74 percent, versus first mortgage default rates that hit 5.67 percent.
• Extending credit for the purchase of a car — which rapidly depreciates in value — is not profitable unless it’s repaid, so putting consumers in car loans they can’t afford is not a sustainable business model.
• New-car dealerships provide a valuable financing option to consumers. Credit offered by new-car dealers routinely carries lower interest rates than credit offered by other lenders for similar borrowers.
• It’s illegal to misrepresent a borrower’s credit background and a lender who does so is liable for any default.
Enforcement of existing laws against a small minority of bad players is in everyone’s interest, but smearing an entire industry for the misdeeds of a few is just plain wrong."