Nearly 2 million new cars were purchased with home-equity loans in 2007, but that source of vehicle financing is shrinking this year as home values fall.

If new-vehicle sales continue to recede, say lenders, the share of home-equity loans (HEL) used for new-vehicle purchases also will fall from last year's 11.77%.

“The housing crisis, connected with the credit crunch, has really knocked consumers back on their heels,” says AutoNation chairman and CEO Michael J. Jackson.

The nation's top auto retailer, AutoNation has suffered sharp sales declines in the last year in its leading markets, California and Florida.

In those states, as well, HELs have accounted in 2007 for larger chunks of the new-vehicle totals — 29.83% of 1,962,548 sales in California and 19.7% of 935,187 sales in Florida.

According to data from Moody's, auto lenders are sustaining losses on about 3.4% of their loans, a rate about 30% higher than in 2002.

One of the nation's largest subprime lenders, Fort Worth, TX-based AmeriCredit, Inc., reflected the nationwide slump in new-vehicle sales by deciding to pare its 2008 auto loan originations to about $3 billion from $9.2 billion in 2007.

“What you are seeing at AmeriCredit probably is happening at most captive automaker lenders, but to a lesser degree,” says New York financial analyst William Ryan. “Inability of home owners to tap their home equities because of shrinking home values has become a national syndrome.”

GMAC President William F. Muir called the situation “a challenge, but not a crisis.”