This PDF Is a Selection from an Out-Of-Print Volume from the National Bureau of Economic Research

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research

Volume Title: The Quality of Consumer Instalment Credit

Volume Author/Editor: Geoffrey H. Moore and Philip A. Klein

Volume Publisher: NBER

Volume ISBN: 0-870-14484-7

Volume URL: http://www.nber.org/books/moor67-1

Publication Date: 1967

Chapter Title: Appendix F: Quarterly Data on Automobile Contract Terms and Collection Experience for Twelve Metropolitan Areas, 1953–56

Chapter Author: Geoffrey H. Moore, Philip A. Klein

Chapter URL: http://www.nber.org/chapters/c1469

Chapter pages in book: (p. 216 - 227) Appendix F: Quarterly Data on Automobile Contract Terms and Collection Experience for Twelve Metropolitan Areas, 19ç3—ç6

As is indicated in Chapter 3, data are for January, April, July, and October for 1953 through April 1956. They were provided by a large sales finance company to represent changes in terms and experience in twelve metropolitan areas during this period. These areas were selected on the basis of their employment experience in 195 3—55 to encom- pass the complete spectrum of labor market situations as defined by the Bureau of Employment Security, as well as to cover the country geographically. The period to which the data apply was, of course, basically a fairly prosperous period, but it does include the mild busi- ness contraction of July 1953—August 1954. During this recession we have traced a number of the relevant economic variables by means of cross-sectional analysis. The twelve metropolitan areas and their classification with respect to adequacy of labor supply are: July 1953 July 1954 July 1955 Hartford I II B New York City III III C Philadelphia III IV-A D Atlanta II II B Pittsburgh III IV-A D Chicago II III C St. Louis II IV-A C Indianapolis II III C Detroit II IV-A C Dallas II II B Denver II II B Los Angeles III III C Source: Labor Market and Employment Security, U.S. Bureau of Employment Security, selected issues. The Bureau changed its classification in June 1955, hence the two sets of symbols. The two classifications are: I. Labor shortage A. Critical shortage II. Balanced labor supply B. Few more jobs than people III. Moderate labor surplus C. Few more people than jobs IV-A. Substantial labor surplus D. More people than jobs IV-B. Very substantial labor surplus E. Considerable labor excess F. Substantial labor excess TABLE F-i NumberA of New-Automobile Contracts, Twelve Metropolitan Areas, 1953—56 B C DIndex, JanuaryE 1953:100F Are a G H I J K L JulyJan.Oct.Apr.1953 155.8165.8141.3100.0 100.0 165.1172.8162.2 114.2118.0117.3100.0 100.0110.7120.7123.1 100.0 161.8170.0 89.3 155.1172.8165.8100.0 154.2 140.0140.2100.0 143.4174.6150.9100.0 201.1220.2207.1100.0 143.5137.1100.0155.8 122.4 100.0146.9143.8 100.0142.9138.1129.2 JulyOct.Apr.1954 163.8142.2106.8 197.6166.2105.4 138.2107.3 78.8 129.5103.6 73.8 102.4 96.045.2 183.0158.7 80.6 133.2100.9 67.1 142.5147.6 94.4 238.3214.1110.2 132.4123.8 86.7 118.0102.7 70.4 143.3128.3 87.8 CD JulyJan.Apr. 225.7183.9122.8122.7 233.4246.7136.1161.4 209.4192.0123.9139.7 170.5110.7137.0 91.2 195.1160.2101.9 94.9 210.0114.7148.3179.8 205.8167.3100.6 96.3 234.3184.2130.6139.6 285.3277.0194.2237.2 207.2172.1113.6136.4 92.4 163.9135.9 74.7 200.5164.2125.0 98.3 AnnualJan.Apr.Oct.1956 averages 230.0'177.5188.9 215.8208.6294.8 236.0 151.4167.9 130.1137.0185.8 226.6107.7131.7 160.6156.6198.1 201.3153.3140.1 256.2156.5189.2 240.3207.4306.5 234.9159.7175.9 149.9124.4163.4 166.5142.3198.8 1955195619541953 (Jan.& Apr.) (Jan.& Apr.) 183.2190.6153.4133.9140.7 212.2227.8191.4157.6150.0 159.61580190.3116.0112.4 133.6 114.1146.1104.4113.6 119.8131.0171.0130.3 84.6 158.6147.2175.6142.6148.4 146.7 131.8167.7100.4133.6 157.4131.0 201.3172.8142.2 223.8235.6265.8200.0182.1 134.1 167.8142.8182.0119.8 105.3 137.2134.5128.3 95.9 154.4131.2165.4121.1127.6 ' TABLE F-2 I'J New-Automobile Contracts .with A B Down Payment of Less than 33 Per Cent,TwelveC MetropolitanD E Areas, 1953—56 F Area 0 As Percentage of Total Contracts,H I J K L !- 00 JulyJan.Apr. Oct. 15.6 17.712.613.3 13.519.3 9.17.8 30.1 23.7 20.017.8 11.813.7 8.98.7 21.029.714.717.1 9.8 9.6 7.8 6.0 8.7 10.7 7.5 12.1 27.2 37.430.133.2 7.34.5 5.21.9 4.7 3.7 4.0 3.9 7.76.8 8.57.3 10.9 I- 11.410.610.0 '. ., Jan. Oct.Apr.July 13.6 25.116.7 24.5 11.5 22.913.8 21.9 23.4 23.1 28.2 27.8 10.1 9.4 20.2 20.3 20.512.417.111.9 17.011.614.7 8.2 14.4 24.815.4 27.6 39.9 39.4 37.3 40.9 2.7 13.0 5.9 13.2 5.0 11.2 9.45.2 11.0 9.78.18.6 11.1 15.9 c? JulyJan.Apr.1955 18.719.8 Oct. 29.2 33.7 41.3 43.3 30.2 29.4 33.0 31.0 33.7 42.1 45.551.2 20.933.322.7 26.2 36.541.030.2 41.0 21.117.0 21.018.4 26.1 29.134.7 32.3 41.3 54.947.451.5 22.820.518.7 22.8 16.0 20.117.614.7 12.4 25.419.717.5 21.8 27.1 33.5 Cl) . Jan.Apr. 42.8 31.8 36.8 29.9 33.2 56.0 57.2 29.9 33.8 35.5 38.2 23.9 23.6 30.7 31.6 57.357.5 20.918.8 23.719.8 21.530.8 35.1 C-) Annual19531954 averages 37.2 195519561955 (Jan. (Jan. & &Apr.) Apr.) 20.014.8 36.9 31.4 39.8 12.4 30.917.5 29.8 31.6 22.9 25.6 43.1 37.956.6 15.010.8 21.831.825.8 37.220.615.5 33.4 36.8 12.9 8.3 19.4 23.819.0 20.6 9.8 30.6 27.6 31.2 32.0 39.4 48.8 44.4 57.4 21.119.6 8.74.7 19.8 17.1 7.74.1 21.815.4 7.6 18.8 9.4 26.215.0 10.7 28.616.4 24.4 36.2 New-Automobile Contracts with Maturities 25 Months and Over as Percentage of Total Contracts, Twelve Metropolitan Areas, 1953—56 TABLE F-3 Jan.Apr.1953 0A 0.50B 0.40.2C 0.21.8D 9.10.5E 13.1 1.6F Area 0.3G1.4 63.362.9 H 21.320.3 I 18.519.9 J K7.76.7 0.9L1.1 Jan.JulyJulyApr.Oct.1954 3.39.10.10 11.5 3.91.91.1 00.11.5 13.1 3.22.41.5 12.611.0 8.49.9 7.6 25.612.413.1 20.6 9.87.64.7 69.969.064.9 20.310.7 6.49.4 21.617.415.916.1 10.912.8 9.85.7 4.63.4 Jan.Apr.Oct.1955 52.145.042.726.5 53.242.641.130.8 44.027.259.358.4 41.437.732.9 59.847.044.832.6 49.742.547.939.8 60.549.749.942.3 69.970.867.777.6 59.454.948.042.7 59.350.452.345.4 40.349.637.622.8 45.9 55.746.536.017.7 '5.7 ' Jan.JulyApr.Oct.1956 69.768.471.254.1 61.758.862.559.0 72.774.974.468.874.1 56.146.359.256.555.5 62.858.268.567.9 65.356.259.256.9 72.9 69.067.972.7 82.179.675.076.479.7 61.351.865.359.9 66.3 73.771.169.9 66.2 64.165.467.1 71.365.965.663.8 - Annual1956195519541953 (Jan.averages & Apr.) 69.048.655.620.4 54.30.0 60.247.921.8 0.9 73.464.069.432.4 0.6 57.843.849.821.7 1.5 60.553.460.824.6 7.6 60.846.152.131.4 8.8 70.455.163.030.6 3.5 78.072.476.671.565.0 56.657.259.930.414.4 72.454.861.534.217.6 45.0 65.855.320.8 7.8 68.657.826.550.8 2.5 Number of New-Car Repossessions During Month as Percentage of Accounts Purchased over TABLE F-4 Jan. — A Preceding Twelve Months, Twelve Metropolitan Areas, B1953—56 C D E F Ar e a G H I J K L Apr. July Oct. .087 .063 .083 .130 .063 .059 .055 .097 .069 .149 .168 .142 .109 .143 .066 .144 .030 .035 .050 .122 .072 .050 .034 .042 .051 .028 .062 .057 .087.088.095 .098 .117 .073 .074 .160 .069 .037 .061 .092 .049 .038 .044 .037 .055 .030 .072 '< Jan.JulyApr.1954 .091 . Oct. . .216.179.140 .195 .114 .096 .079 .100 .315 .251 .176 .231 .286 .202 .149 .169 .130 .095 .204 .166 .085 .011 .088 .033 .143 .134 .111 .109 .231.214.307.249 .181 .141 .139 .215 .153 .085 .143 .177 .161 . .143 .170.157 .132 .136 .117 Jan.1955 .140 Apr. July Oct. .266 .180 .172 .199 .107 .073 .056 .140 .242 .259 .281 .410 .241 .113 .139 .254 .109 .112 .083 .174 .156 .049 .103 .132 .187 .091 .087 .101 .338 .237 .276 .275 .199 .154 .129 .280 .153 .161 .139 .214 .156 .115 .085 .129 .170 .100 .079 .144 —

r Jan. iApr. .448.270 .199 .133 .685 .610 .414 .361 .189 .370 .239 .187 .181 .186 .599.516 .262 .249 .334 .287 .156.127 .239 .190 C)

Annual19541953 averages fI 1955 19551956 (Jan. (Jan. & Apr.) .091 .182 .204 .359.223 .068 .097 .094 .090 .166 .132 .243 .298 .250 .116 .48 .202 .187 .177 .388 .059 .149 .120 .110 .280 .050 .054 .110 .102 .213 .050 .124 .116 .139 .184 .092 .250 .282 .288 .558 .106 .169 .190 .176 .256 .065 .140 .167. .157 .310 .042 .136.158.121 142 .062 .131 .123 .135 .214 TABLE F-5 a Two-Year Weighted Moving Average to Estimated Repossession Rates, New-Automobile Contracts (Estimated by Approximate Rates for Loans as of Year of Purchase), Twelve Metropolitan Areas, 1953-55 A B C D E F G Area H I K L Ave 12 rage of Apr.Jan.1953 1.11.3 0.81.0 1.81.6 1.6 1.5 0.60.8 0.50.8 0.70.8 1.31.5 2.11.1 0.80.9J 0.6 0.7 0.8 1.01.2Areas Oct.July 1.71.3 0.91.1 2.52.1 2.41.7 0.91.9 0.5 0.6 0.81.1 2.21.4 1.81.3 0.91.3 0.81.3 1.2 1.1 1.61.1 - 1954 . JulyApr.Jan. 2.32.9 0.91.31.11..8 2.73.04.3 3.9 2.21.8 1.81.91.53.6 0.8 0.71.21.4 2.71.81.21.7 3.33.04.3 3.51.91.8 2.41.91.7 1.61.92.91.9 1.4 1.8 2.21.5 3.01.81.9 Jan.Oct.1955 3.83.3 1.8 5.13.5 3.42.4 2.01.6. 2.1 .2.2 4.94.0 2.92.2 2.92.2 2.4 2.5 3.02.3 Apr. 2.6 1.1 4.2 2.4 . 1.3 1.2 3.9 2.1 2.3 1.3 1.5 2.1 Annual195519541953 ( Jan. & Apr.)averages 3.22.71.4 1.41.31.0 3.42.04.6 2.92.61.8 2.21.01.8 0.61.71.0 1.8 0.81.7 3.64.41.6 1.6 2.52.4 2.0 2.61.0 2.10.91.8 2.01.71.0 2.52.21.2 p.-) 222 Quality of Consumer Instalment Credit Notes To Table F-5 Note: Inasmuch as the estimated repossession rates presented in this table have been utilized extensively in the text, it is appropriate to describe the method used for estimating repossession rates and the reasons why such estimation was necessary. Repossession, if it is to occur, does so over a period of time after the purchase of an automobile; the down payment and maturity information presented as of the end of a year cannot properly be related to the actual repossession data for the same calendar year. Nor could any simple lagged relation significantly improve the correspondence. The National Bureau obtained information from a large sales finance company indicating nationally the number of instalments paid before repossession occurred. About 89 per cent of all repossessions occur within the first year. By assuming arbitrarily that the rest occurred within the second year very little distortion was introduced by extra- polatingthe known time distributionforthe first year and it was possible to obtain the following percentage distribution of the proportion of repossessions which would have occurred every three months for two years following the purchase of a car: Percentage of All Repossessions Number of Instalments Paid Occurring from Prior to Repossession Date of Loan Purchase 0—2(1st Q) 34.3 3—5 (2ndQ) 26.0 6—8(3rd Q) 17.6 9—11 (4th Q) 11.3 12—14 (5th Q) 6.8 15—17 (6th Q) 3.0 18—20 (7th Q) .5 21 and over (8th Q) .5 100.0

Thesepercentageswereutilizedasa moving sum inorder to relate the number of repossessions to the time the loans were purchased. This method of weighting the repossession data was tested with aggregate data and found to be superior to any simple lagged method of estimating repossession rates as of the time the loan was purchasedbothfor new-and used-automobile loans. Hence it was applied to the local area data to estimate repossession rates as of the time loans were purchased. Because of the utilization of the moving sum method, the last three months (October, January, April) are subject to increasing error in the estimate due to the fact that the two year (8 point) moving sum is based on seven, six, and five observations respectively (adjusted to 8-point coverage). This means that a small fraction of loans is lost in the ebtimates, which understate the repossession rate estimate. Late Model Used-Automobile Contracts with Down Payment of Less Than 33 Per Total Contracts, Twelve Metropolitan Areas, TABLE F-6 1953—56 Cent as Percentage of Jan.1953 A B C D .E F Area G H I J K L Apr. July Oct. 15.6 17.2 15.9 12.6 19.3 25.814.719.1 30.1 28.9 23.5 22.0 13.7 18.410.716.8 29.729.9 38.513.9 12.813.512.6 9.8 12.714.912.314.0 . 34.1 46.4 39.3 27.2 20.0 2.52.76.5 7.4 9.2 9.05.8 8.8 8.9 10.4 8.0 . 23.419.6 22.7 Jan.Apr.1954 21.6 July Oct. . 20.414.5 24.1 22.3 24.911.8 31.6 29.1 26.217.6 32.2 35.7 15.0 13.4 26.0 22.7 173 8.4 17.8 13.3 20.019.517.216.2 2,0.611.413.119.3 18.2 21.1 14.0 27.6 8.31.2 11.1 8.9 6.0 12.0 6.9 13.4 8.9 7.9 8.2 8.0 23.316.3 27.0 Jan.1955 24.8 Apr. July Oct. 28.4 35.7 39.3 35.5 42.0 42.2 48.0 50.5 36.2 35.9 48.657.2 28.3 33.8 34.5 34.3 33.9 44.4 32.9 30.3 27.123.927.018.9 26.329.124.321.8 34.6 36.7 38.8. 45.6. 15.912.419.4 33.2 16.8 21.619.817.6 10.3 11.5 14.7 16.3 30.6 32.1 35.8 Jan.1956 35.3 Apr. 41.9 44.2 49.2 54.0 72.159.0 41.4 41.9 33:5 30.9 29.331.6 24.2' 22.4 46.3 46.1 28.3 33.2 25.9 23.9 16.6 18.1 42.7 Annual1953 averages 43.3 1954 1955 1956 (Jan. & Apr.) 20.315.3 34.7 43.0 24.419.7 45.7 51.6 26.1 65.627.947.0 14.9 32.719.3 41.6 35.428.014.2 32.2 30.424.518.212.2 23.3 25.416.113.5 39.2 22.7 38.9 46.2 7.2 30.819.7 7.4 7.8 24.919.0 9.6 9.0 17.413.2 8.2 21.8 22.8 CD 33.4 43.0 TABLE F-7 C'-I

C.) C

CD -4 Late Model Used-Automobile Contracts with Maturities of over 18 Months or 25 Months or Longer as Percentage of Total Contracts, Twelve Metropolitan Areas, 1953—56 -I..J A B C D E F Area G H I J K L CD • Percentage With Maturities Over 18 Months Jan.Apr.1953 41.945.2 50.748.7 45.146.5 38.637.3 64.562.3 53.549.9 48.756.1 84.779.0 68.561.1 59.8 68.2 46.652.0 48.948.6 C-)CD JulyOct. 40.849.2 43.364.2 Percentage With Maturities43.749.4 25 Months 35.3 Or Longer 50.9 46.7 70.1 51.957.9 57.259.5 74.379.0 71.676.0 66.569.3 57.657.5 47.751.4 C- JulyApr.Jan.1953 0 0 0.20.40.2 0.20.4 0.30.5 0.2 1.82.91.6 0.20.10 26.912.716.3 0.62.54.2 2.13.91.9 0.10.51.1 0.20.10 Jan.Oct.1954 0.70 0 0 0 0.2 00 0.51.5 0.1 4.32.3 1.21.1 0.21.2 0.60 0.30 Oct.JulyApr. 00.2 5.13.62.6 0.70.60.3 0.30.61.9 (continued) 0.40.80.5 10.7 3.36.4 2.32.72.4 6.48.06.3 4.03.42.4 2.03.50.7 0.61.4 0.82.8 TABLE F-7 (Concluded) 1955 A B C D F Area 0 H I J K L Oct.JulyApr.Jan. 3.33.31.3 11.3 6.76.2 9.18.21.1 2.82.04.11.8 2.12.24.24.3 7.4 11.016.8 6.9 9.16.33.2 14.513.810.512.5 12.6 04.44.3 3.5 6.79.1 2.83.64.34.2 4.66.54.3 Apr.Jan.1956 13.612.4 4.3 22.215.8 8.3 18.613.4 7.6 10.5 8.5 7.05.4 12.112.0 8.98.38.6 22.3 23.5 10.4 7.8 11.3 9.74.2 11.8 9.5 11.3 8.53.3 rD Annual1953 averages 44.3 51.7 Percentage With Maturities46.2 Percentage25 Months OrWith Longer Maturities Over 18 Months 39.5 61.9 53.3 55.4 79.2 69.3 66.0 53.4 49.0 1956195419551953 (J an. & Apr.) 13.0 3.00.30 19.0 8.102.8 16.0 6.00.40.2 9.52.70.70.2 6.23.20.40.2 12.010.5 5.51.7 8.66.80.11.9 12.814.6 22.9 6.2 92.8 15.32.1 10.5 5.92.01.8 3.7 10.6 0.80.4 9.90.14.71.1 Estimated Repossession Rates, Used-Automobile Contracts, Twelve Metropolitan Areas, 1953-55 TABLE F-8 Area AnnualJan.1953 averages A B C D E F G H I J K L Average ofl2Areas Apr.1954 July1955 11.9 9.18.2 Jan.Oct.1954 Apr. July Jan.Oct.1955 Apr. 0 July Oct.

C,,

15.010.214.7 9.6 8.18.75.34.2 13.514.415.910.8 11.3 13.4 9.19.38.2 4.12.45.3 2.62.55.85.4 10.3 5.59.35.6 10.0 6.86.58.3 6.43.82.95.7 8.95.85.18.0 11.5 6.29.45.5 11.811.6 8.57.0 10.5 9.46.85.8 24.016.214.013.8 14.6 8.56.66.7 12.821.515.411.8 11.210.810.419.4 10.5 11.310.619.7 7.15.47.09.5 10.710.419.2 8.2 8.6 14.4 8.79.6 11.3 8.55.54.6 10.816.2 7.18.4 20.414.310.612.2 12.810.511.519.0 11.417.4 9.19.8 Cl, 15.813.011.315.5 7.34.57.55.5 16.413..710.414.7 8.1 11.510.9 9.2 8.05.04.35.9 8.46.14.88.0 8.36.95.49.5 10.6 8.16.99.1 10.8 7.16.19.1 11.410.7 8.67.8 12.0 9.06.66.3 8.9 10.712.9 7.8 10.710.5 8.27.0 F 13.917.012.4 6.29.16.6 13.613.815.4 10.613.0 9.9 13.0 5.85.2 6.87.24.1 12.1 7.57.7 10.2 8.77.9 8.37.55.0 10.6 14.49.67.0 8.2 8.5 10.113.4 9.7 Appendix F 227 NotesTo Table F-8 Note: See note to Table F-5 for discussion of estimating procedure. Distribution of the proportion of repossessions which would have occurred every three months for two years following the purchase of a used car: Percentage of Percentage of Number of All Repossessions All Repossessions Instalments Paid Occurring Quarterly Occurring Quarterly Prior to From Date of From Date of Loan Purchase Repossession Loan Purchase Adjusted to1 Year Limit

0—2(1st Q) 48.4 50.4 3—5 (2ndQ) 27.8 28.8 6—8(3rd Q) 15.2 15.8 9—11 (4th Q) 5.0 5.0 12—14 (5th Q) 15—17 (6th Q) I 3.6 18—20 (7th Q) 21and over (8th Q)J 100.0 100.0* *The percentages in this column were obtained by redistributing the 3.6 per cent of the second year after the purchase so as to give 100 per cent, on the assumption that all loans repossessed are repossessed within one year of the date the loan was purchased. Because of utilization of the moving sum method, the last month (October 1955) is estimatedfrom three observations representing 95 per cent of the repossessions. It was adjusted to 100 per cent coverage, but the small fraction of repossessions thus lost causes minor understatement of the repossession rate for October 1955.