Peter Muriungi, CEO of Chase Auto, said at the summit Chase had adjusted to rising delinquencies primarily by getting tougher on borrower collateral. He said the bank was not as worried about the number of borrowers missing payments, but “collateral’s a bit concerning.” Chase cut back the amount it would loan on used vehicles relative to their value, and “we might pull back a little bit more there,” he said.
However, for the most part, Chase adjusts its auto loan underwriting on the “margin,” and it takes a disciplined approach to lending throughout the economic cycle, he said.
Asked if the current combination of vehicle inventory growth amid higher sale prices would affect Chase’s auto loan policies, Muriungi said it generally does not.
He described Chase’s mindset as “affordability’s affordability,” he said. A borrower can afford a certain percentage of their income, he said. The size of the market affects how much demand can be met, but “the same disciplines” for evaluating customers remain regardless of vehicle prices, he said.
A subprime lender at the conference recalled taking more dramatic action.
Michael Opdahl, COO of Automotive Credit Corp., said May 12 ACC noticed a delinquency trend and in the second quarter of 2022, “we really locked things down.”
ACC doubled the minimum income required of borrowers by demanding borrowers make half of the market’s median family income, Opdahl said. It also quit financing loans with payments beyond 12 percent of a customer’s income.
“We went hedgehog,” he said. “Sometimes it’s easier just to wait it out.”
