Lurking in the background behind the spotlight of record auto lending activity are the financial losses that occur when loans go bad.
In 2013, there were approximately 1.4 million vehicle repossessions in the United States, according to Auto Financial Group, a Houston firm that provides residual-based finance products for credit unions. The average charge-off per vehicle for credit unions was approximately $7,317 per unit and for banks, $7,618. Taking the average loss between banks and credit unions, which is estimated at $7,400, it would come to approximately $10.3 billion in losses, AFG found.
"It really is not too hard to predict whether repossessions will increase," said Dave Langley, vice president of operations at AFG. "New and used vehicle sales are on the rise. As a result, all financial institutions are booking more loans and leases. As the competition for buying paper increases, institutions are relaxing their credit requirements."
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