In August 2020, during the Covid-19 pandemic, an article in the Wall Street Journal discussed rising default rates on automobile loans: "According to the New York Fed, 5.1% of car loan balances were 90 or more days delinquent in the first quarter [of 2020], only slightly below the peak of 5.3% in the

[20072009]

financial crisis." The article noted that: "Auto lending soared in the past decade because low interest rates and longer loan terms reduced monthly payments." Rising loan defaults would pose problems for auto finance companies and other firms that originate automobile loans and for investors who had bought asset-backed securities (ABS) that were made up of securitized auto loans.

What is an auto finance company?

Auto finance companies are ________.

A.

investment banks that raise money through long-term savers and use the funds to produce and sell cars

B.

nonbank financial intermediaries that raise money through sales of commercial paper and other securities and use the funds to make car loans available

C.

retail funding banks that raise money primarily through deposits and use the funds to buy asset-backed securities

D.

commercial banks that raise money primarily through deposits and use the funds to make car loans available