Who Provides Credit in Times of Crisis? Evidence from the Auto Loan Market
33 Pages Posted: 5 Aug 2021 Last revised: 30 Nov 2023
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Who Provides Credit in Times of Crisis? Evidence from the Auto Loan Market
COVID-19 and Auto Loan Origination Trends
Date Written: August 2, 2021
Abstract
We examine the contribution of different lending channels to the auto loan market in times of crisis. Specifically, we explore lending from traditional banks, credit unions, and finance companies (nonbanks) over the past two decades with emphasis on the Great Recession and the COVID-19 pandemic. We find that banks provided weak support during the pandemic, thus losing market share and continuing a trend that emerged following the Great Recession. Nonbank market share during this period grew most significantly for subprime borrowers and in counties with stronger bank dependence. These findings contrast with the experience during the Great Recession, when banks contributed the most resilient credit to the auto loan market. Our paper highlights nonbanks' critical role in the auto loan market in times of crisis, particularly for the subprime segment.
Keywords: nonbanks, auto loans, financial crisis, consumer credit
JEL Classification: G01, G21, G23, L62
Suggested Citation: Suggested Citation