CARE LENDING CUT.

Banks and finance companies in the US are aggressively cutting back on making car loans, as growing numbers of borrowers fall behind on their payments and lenders' access to funding is squeezed in the credit crunch.

Lenders such as Wells Fargo, Capital One and GMAC this week all reported heavy cuts to their auto lending businesses amid signs that borrowers are increasingly affected by the slowing US economy and rising unemployment.

Wells cut its $25bn auto loan portfolio by almost 25 per cent in the third quarter as it pulled back from making riskier loans, while Capital One cut back its volume of car loans by more than half.

GMAC, the GM lending unit now 51 per cent owned by Cerberus, the private equity group, tightened rules to issue loans only to high-quality borrowers. Dealers estimate 60 per cent of the customers who buy GM cars will not qualify for loans under the new rules.

A recent study by CNW Research shows that the number of approved auto loan applications in the US has declined since last year. Prime approvals fell 10.2 per cent, while for subprime borrowers the approval rate is down by 66.1 per cent.

Source: Financial Times.