Who Provides Credit in Times of Crisis? Evidence from the Auto Loan Market

33 Pages Posted: 5 Aug 2021 Last revised: 30 Nov 2023

See all articles by José J. Canals-Cerda

José J. Canals-Cerda

Federal Reserve Bank of Philadelphia

Brian Jonghwan Lee

Columbia University - Columbia Business School; Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

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

Canals-Cerda, José J. and Lee, Brian Jonghwan, Who Provides Credit in Times of Crisis? Evidence from the Auto Loan Market (August 2, 2021). Available at SSRN: https://ssrn.com/abstract=3897908 or http://dx.doi.org/10.2139/ssrn.3897908

José J. Canals-Cerda (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

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Brian Jonghwan Lee

Columbia University - Columbia Business School ( email )

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United States

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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