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Less is more: the impact of auto lender risk on household auto purchases
Lange, Ian Colorado School of Mines. Payne Institute for Public Policy McKennie, Caitlin Moro, Mirko
Lange, Ian
Colorado School of Mines. Payne Institute for Public Policy
McKennie, Caitlin
Moro, Mirko
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2022-07-05
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Abstract
Credit risk can be an impediment to new auto purchases, especially for electric vehicles. This paper looks at the elimination of auto loan cramdowns for Chapter 13 bankruptcy proceedings, where the loan value is made equal to the auto value, on three outcomes: auto value, likelihood of new auto, and loan-to-value ratio of new autos. Using a difference-in-difference approach based on a state's historical use of Chapter 13 bankruptcy, we show that household's secure better loan-to-value ratios and acquire higher valued autos due to lower credit risk following the reform. Black households are more likely to have a new car while low-asset households have worse loan-to-value ratios then the average. Together, these results indicate that lower risk to auto lenders can facilitate new electric vehicles purchases.
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