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Determinants of automobile loan default and prepayment

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  • Sumit Agarwal
  • Brent W. Ambrose
  • Souphala Chomsisengphet

Abstract

The authors examine whether a borrower’s choice of automobile reveals information about future loan performance. They find that loans on most luxury automobiles have a higher probability of prepayment, while loans on most economy automobiles have a lower probability of default, even when holding traditional risk factors, such as income and credit score, constant.

Suggested Citation

  • Sumit Agarwal & Brent W. Ambrose & Souphala Chomsisengphet, 2008. "Determinants of automobile loan default and prepayment," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 17-28.
  • Handle: RePEc:fip:fedhep:y:2008:i:qiii:p:17-28:n:v.32no.3
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    File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2008/ep_3qtr2008_part2_agarwal_etal.pdf
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    References listed on IDEAS

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    1. Carol Corrado & Wendy E. Dunn & Maria Ward Otoo, 2006. "Incentives and prices for motor vehicles: what has been happening in recent years?," Finance and Economics Discussion Series 2006-09, Board of Governors of the Federal Reserve System (U.S.).
    2. Kau, James B. & Keenan, Donald C. & Muller III, Walter J. & Epperson, James F., 1995. "The Valuation at Origination of Fixed-Rate Mortgages with Default and Prepayment," The Journal of Real Estate Finance and Economics, Springer, vol. 11(1), pages 5-36, July.
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    Keywords

    Automobiles - Prices;

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