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Southern states proving a lucrative market for auto financiers

Nov 20, 2013 Phil Burgess

Auto lending across the United States has been gaining momentum in recent months, with American automakers seeing record sales of new cars. The trend has been a result of a robust economic recovery and jobs growth that has seen consumers gain access to more capital to invest in major purchases than in years past.

Although the development has spread optimism among auto lending leaders, some in the industry want to know which markets offer the best prospects for sustained borrowing growth. According to a recent article in USA Today, southern states may be the most viable market for auto lenders.

The source cited data from that found six of the 10 U.S. cities where car owners owe the most on their car loans are in in the south. In particular, Louisiana is one of the most lucrative states for auto loan activity at the moment, with three metro areas in the Top 10.

Shreveport, La., took the top listing, with auto borrowers owing an average of $18,603 on their loans. New Orleans took the second spot, with an average due payment total of $17,759. The third Louisiana city on the list, Lafayette, was ranked number six, with borrowers owing as much as $16,639.

Other southern cities on the list included Houston, San Antonio and Miami-Ft. Lauderdale.

Resilient economy
The reason the south appears to be leading the nation in auto borrowing is because the region's economy remained relatively healthy during the economic downturn of recent years, the source indicated. In fact, Louisiana had some of the most significant jobs growth of any state in the nation during the summer months.

Getting active in these markets could prove to be a lucrative decision for American auto lenders and other financial institutions. More specifically, data suggests banks may want to rethink their lending strategies if they are heavily involved in mortgage extensions and not auto financing.

Credit Writedowns recently reported that despite solid growth in the real estate market in the last two years, real estate loans have once again dipped into the red. However, the source stated that auto loans continue to pick up steam. Overall, car lending portfolios are up 6.4 percent compared to last year.

This trend should dictate what type of loan activity banks, short term lenders and other financial groups get involved in during the coming months. With car purchasing on the rise, auto lending represents one of the most lucrative sectors for American baking institutions.