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Abstract:
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We study the impact of the COVID-19 crisis on auto loan origination activity. We focus on the impact of the crisis over time, across lending channels, across credit score segments, and across relevant geographic characteristics such as urbanization rate. We measure a significant drop in auto loan originations in March-April, followed by a near-rebound in May-June. We document the largest drop, and the smallest rebound, in the subprime segment. We also document a more pronounced impact in urban counties. We do not find any suggestive evidence that used car loan originations exhibited patterns significantly different from the rest of the market. Bank-financed originations experienced the largest drop and the smallest rebound, thus resulting in a loss of market share. The drop in auto loans originated thru the bank lending channel was particularly significant among subprime borrowers. The impact of the COVID-19 crisis across origination channels contrasts with the experience during the Great Recession when banks contributed the largest support to the auto loan origination segment during periods of stress and when finance company-originated auto loans were depressed.
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