Car credit companies affected by slowing US market

Car credit companies are feeling the effect of the credit crunch that originated in the US. Used cars have plummeted in value, while transactions involving pick-up and sport-utility vehicles have ground to a halt. Car finance companies have taken to selling off-lease vehicles at prices lower than contracted residual values. Scott Carstens, head of quality control and lending at Crescent Bank and Trust of New Orleans, a sub-prime lender, said that many traditional banks and car finance companies had tightened their credit criteria. This has had the effect of opening up the car finance marketplace to specialised sub-prime lenders that take more time to scrutinise individual applications. Wholesale used vehicle prices in America dropped by 7.4 per cent in the year to June, including a 3.3 per cent tumble just in the previous month. The statistics were announced by Adesa, a vehicle auction group. Prices for full-sized pick-up vehicles and SUVs have plummeted by a quarter over the past year. Other luxury vehicles also saw sizeable falls in value. Chris Flanagan, head of ABS research at JPMorgan, said that concerns centred on the Detroit car makers. "Other issuers have had pretty good success in the market," he said.