BMO, a bank with offices in Canada and some States, is getting out of the car loan business. Losses are climbing which is a sign of pressured consumers. Any other signs of pressure out there?
BMO Bank getting out of car loan business
- Thread starter Snagglefoot
- Start date
I find it impossible to not be able to make money dealing secured auto loans with rates this high.
They are closing their auto loan business because they are likely experiencing a bank run. They have a 1.3 star rating on google and falling.
They are closing their auto loan business because they are likely experiencing a bank run. They have a 1.3 star rating on google and falling.
I think it’s likely also because safe money is less likely to buy a car at these interest rates. That’s why I decided not to buy another car this year. For that interest level I’ll wait a few years and put away what I would have spent on a car loan.
They just acquired Bank of the West. Dealt with Bank of the West for a while because one of our local stores used it. It was horrible! I bet all the unhappy Bank of the West customers probably googled BMO, read the bad things about them, and are taking this initiative to switch to superior competitors.
My guess is they wrote a lot of loans when the cars shortage happened at above MSRP price and now the cars shortage are near the end, customers who got screwed (either too high of an interest or too high of an MSRP) decided to just turn in the key, and after repo the loans are having a loss, or they have to mark down the value of their loans and they are taking a hit because of that.
I’ve worked for BMO for 20 years. They have vacillated on auto finance for many years, especially in the US. It was just a bit odd. Looks like loan loss provision jumped up for auto loans in a very big way. Business decision. Interesting one, but hey…
That being said, it’s a very well capitalized and conservative bank. They have been a good employer to work for, have a loyal following, and have some excellent product offerings.
I don’t drink the kool aid, but I banked with them way before I worked for them.
As far as a the comment above about a bank run, not even close.
That being said, it’s a very well capitalized and conservative bank. They have been a good employer to work for, have a loyal following, and have some excellent product offerings.
I don’t drink the kool aid, but I banked with them way before I worked for them.
As far as a the comment above about a bank run, not even close.
It’s actually the retail auto loan business they are exiting. They will still issue auto loans through their personal banking business.
Smart move, I'm sure they did their homework and felt not dealing with financing cars at the dealerships was a good move. With these insane rates I can see the repos piling up. Oh and raising interest rates to tame inflation isn't going to work when oil prices are on the rise. I'll leave it there.
My Take is that with all the push toward EVs and their abysmal resale value, the bank has really NO asset to recover when/if the borrower defaults, so rather than say we won't finance EVs which would put them in a very bad stead vis a vis Governments with its consequences, they decided tu pull out entirely.
A former co-worker of mine authored a research paper at the US Federal Reserve on auto loans. Basically owners don't default on them in numbers that you would expect and it's mostly at the subprime level. Subprime borrowers are more sensitive to rising prices (housing, food, energy, etc).
GON
$100 Site Donor 2024
The article is not wholistically encompassing.
BMO is getting out of the indirect car loan business. BMO is staying in the retail auto loan business.
Indirect car loan business is a extremely competitive business, working on the slimmest margins. The selling dealer makes the profits on indirect car lending, typically the financial institution makes the very least on the loan and has all the risk. BMO pulling out of the indirect car lending market is no big deal and no tea leaves required on why this is happening.
And for note, indirect lenders often have to take some really bad loans from a dealership to get the ok/ decent loans. The dealers have a portfolio of indirect lenders to work with.
This news is in fact no news/ fake news. Kind of like Lowes getting out of the motor oil sales business.... yawn.....
BMO is getting out of the indirect car loan business. BMO is staying in the retail auto loan business.
Indirect car loan business is a extremely competitive business, working on the slimmest margins. The selling dealer makes the profits on indirect car lending, typically the financial institution makes the very least on the loan and has all the risk. BMO pulling out of the indirect car lending market is no big deal and no tea leaves required on why this is happening.
And for note, indirect lenders often have to take some really bad loans from a dealership to get the ok/ decent loans. The dealers have a portfolio of indirect lenders to work with.
This news is in fact no news/ fake news. Kind of like Lowes getting out of the motor oil sales business.... yawn.....
GON
$100 Site Donor 2024
Although BMO calls it the retail auto finance unit, the label is wrong. The label should be indirect lending unit. The loans private citizens apply for at BMO are actual retail loans.
Irrelevant unless we know something like what % of the market that they hold.
Answer = No, maybe?
It's just a banking decision. An example back in 2020 Wells Fargo one of the largest USA banks stopped auto loan processing for over 1,100 independent car dealers, they still lend to big dealerships and never lent to individuals.
In 2021 (approx) they cut off lending for all personal loans too. I think sometimes, lending to the public is getting so convoluted with regulations that it's just not worth the exposure, maybe.
I can see the impending possible disaster, people willing to take out 6, 7, 8 year car loans. We know if it all crashes down the banks will get dragged through the mud because they lent money to people who asked for it. *LOL*
