Business & Finance: Auto Credits

Easy money conditions this year have undoubtedly proved a stimulant to the automobile business, now concluding a very generally successful and prosperous season.

Funds have been available to finance the purchase of cars, not only by dealers from makers, but by owners from the dealers. Though this latter type of financing is sometimes unsoundly handled, statistics on 50 leading auto-financing companies indicate that, even during the unsettled year of 1924, only 1/5 of 1% of such financing resulted in loss to the lenders—a high ranking even among ordinary commercial “receivables.”

About 90% of cheap cars and about 50% of high-priced cars are sold on time or deferred payments. Last year, about a billion dollars was employed in this way to finance the purchase from dealers of new cars alone. Since extension of credit to dealers along similar lines is usually a safer operation, probably another billion dollars was thus employed, making two billion dollars used altogether.

In 1924, there were 3,617,602 motor cars and trucks produced in this country, possessing a wholesale value of $2,328,000,000 and a retail value of $2,900,000,000. It is estimated that 75% of this total was financed by time payments. Since “automobile paper” usually matures in a year and is payable in monthly installments, about one billion dollars was thus continuously employed.