Determinants of Automobile Prepayment and Default

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.

Agarwal, Sumit and Ambrose, Brent W. and Chomsisengphet, Souphala, Determinants of Automobile Loan Default and Prepayment (September 17, 2008). Economic Perspectives, Vol. 32, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1269525