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Auto Sales and Credit Supply
Vehicle purchases fell by more than 20 percent during the 2007-09 recession, and auto loan originations fell by a third. We show that vehicle purchases typically account for an outsized share of the contraction in economic activity during a recession, in part because a concurrent tightening in auto lending conditions makes car purchases less affordable for many households. We explore the link between lending conditions and vehicle purchases with a novel gauge of credit supply conditions--household perceptions of vehicle financing conditions as measured on the Reuters/University of Michigan ...
How Much Are Car Purchases Driven by Home Equity Withdrawal?
Previous research indicates that changes in housing wealth affect consumer spending on cars. We find that home equity extraction plays only a small role in this relationship. Consumers rarely use funds from equity extraction to purchase a car directly, even during the mid-2000s housing boom; this finding holds across three nationally representative household surveys. We find in credit bureau data that equity extraction does lead to a statistically significant increase in auto loan originations, consistent with equity extraction easing borrowing constraints in the auto loan market. This ...