Evening star., 1926-12-05
By WILLIAM ULLMAN.

Excessively easy credit for persons
| who desire to purchase cars on the
installment plan Is being drawn to a
gradual but definite conclusion. and
financial responsibility Is developing
into one Of the most vital factors in
the acquisition Of automobiles.
This is the view gained from a sur
vey of the automobile financing situa-
ton as it has developed during the
current year.
The financing of cars has ceased to
be a haphazard. hit-or-miss matter
and has settled down to a carefully
manager. substantial business. Ac-
counts are carefully scrutiniZed and
credit is extended only where its prac-
tice is in worthy hands. The rates
are higher, payments are fewer and
collections are more completely sys-
tematiZed.
The tightening process has been
under way for period of years.
Many predicted that it would injure
automotive sales and bring about a
trade recession. but the year has been
the best in automobile history, and
fewer irresponsible" persons have
been granted credit. Instead Of being
content with their closer inspection Of
accounts. the financing organizations
appear convinced that more stringent
credit rulings are in sight as definite
aid to the whole situation,
Three General Groups Cited.
Automobile. financing in America
today is handled by three general
groups: The manufacturer, the bank
ers, with the assistance of the in
demnity and casualty insurance COM
panies. and the finance companies.
There are many special plans and
numerous combinations of interests,
but the brunt of the work of read
justing credit conditions is being ac-
complished by these three general
elements, largely because their ex-
tensive experience has taught them
the dangerous pitfalls in which loose
credit inevitably results.
The reasons for more careful scru-
tiny of accounts vary, depending upon
which branch of business is consider
lenders who desire a high interest re-
turn and a wide spread of business
with maximum security. Competition,
rate cutting and too great an appe-
tite for volume led some of these
concerns into trouble. Many of them
found they were in the used-car busi-
ness, repossessing automobiles own
ers could not pay for and losing fur
ther in an effort to dispose of them.
Manufacturers whose financial posi-
ton is such as to enable them to set
up subsidiary credit organizations
must guard against repossessions. for
an oversupply of used cars of their
own make has the effect of making
new car distribution more difficult.
The situation Is somewhat different
with the banker, but he, too, aims for
greater safety and favors the firm
conservatism of the insurance COM
panies with whom he operates. Under
a typical insurance finance plan, the
local banker furnishes the money, but
Is insured against loss by the indem-
nifty company. The safeguard of the
latter is careful scrutiny of accounts
offered, as well as the listing of au-
thorized dealers. Dealers favor such
conservatism because they now realize
that in collaborating on such a plan
they are eliminating excessive repos-
sessions and thus are avoiding a glut-
ted local used-car market
To obtain credit under one Of these
ance-dealer-banker plans it is
necessary for the motorist to fill out
an application detailed enough to sug.
gest that he might be applying for
life insurance.