Less is More: The Impact of Auto Lender Risk on Household Auto Purchases 

Payne Institute Faculty Fellow Ian Lange, Payne Institute Researcher Caitlin McKennie, and Mirko Moro write about how 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. July 5, 2022.