Tighter Subprime Lending Stymies Auto Sales

Auto sales won’t recover completely unless subprime lending – a real victim of the 2008-2009 credit freeze – makes more of a comeback.

So says Kevin Westfall, senior vice president-sales and finance and insurance for AutoNation Inc., the nation’s largest auto chain.

Normal sales could reach 16 million units a year in the U.S. after the auto industry regains its bearings after two bad years, he says. “But without subprime customers, we won’t top 16 million.”

AutoNation is down about 50% in that lending segment as financial institutions that tightened up their standards are wary to lend to car shoppers without strong credit scores.

“We can’t place the paper for credit scores of 620 and under,” Westfall says at an American Financial Services Assn. conference.

“We’re not seeing enough of anyone, but especially subprime customers,” says Portland, OR, dealer Ed Tonkin, the 2010 chairman of the National Automobile Dealers Assn.

Some observers say subprime lending has made a partial recovery, but not yet a complete one.

“Subprime lending has fallen off, and a lot of our once-prime customers are now subprime,” Tonkin says, referring to people hurt by the recession.

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Ed Tonkin says some once-prime customers now subprime.