MILWAUKEE — It's starting to feel as if the good times have returned at Diamond Jim's Motor Cars, with its sales of used cars up at least 30 percent this summer from the same period last year.
"We're doing well, we're having fun," said Tom Letizia, the owner of Diamond Jim's, which operates automotive lots in the Milwaukee area. "We made it through the '08, '09, 2010 drought, and it's now getting back to the glory days like it used to be. People are buying cars, people are spending money."
A lot of it is borrowed money.
The Federal Reserve reported earlier this month that consumer borrowing in the United States is at a record level of $3.47 trillion.
Lenders in Wisconsin, including the largest state-based bank and credit union — Associated Bank and Landmark Credit Union — have felt the increase in consumer borrowing.
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"When we look at auto loans from the first to second quarter, we're up about 74 percent in funded dollars," said John Halechko, executive vice president and director of branch banking for Green Bay-based Associated.
In addition, newly issued credit cards are up about 20 percent from the same time a year ago, he said.
"From our perspective, it's been a very strong year on the consumer lending front," said Jay Magulski, chief executive of Landmark.
Magulski said Landmark is the No. 1 auto lender in southeastern Wisconsin.
"You're seeing strong demand for cars," Magulski said. "We are absolutely seeing that demand from our members as well."
Letizia, who is the son of "Diamond Jim" Letizia, said because interest rates are low and more lenders are willing to extend the payback period and reduce the monthly cost, consumers are buying "a little more expensive car from us."
Economist Brian Jacobsen said looking at what goes into overall consumer spending offers a glimpse of where it may be headed.
"For perspective, we need to break consumer credit into multiple parts," said Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in suburban Milwaukee. "Autos and student loans are at record highs and don't look very sustainable. Revolving credit, like for credit cards, is just beginning to move higher. I actually view the increase in revolving credit as positive. It's the first time credit card debt has increased in the course of this economic recovery. That can show consumer confidence and support spending going forward."
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Jacobsen said credit card debt isn't very interest-rate sensitive, but auto debt is.
"A rise in rates could adversely affect the auto industry, but the magnitude of rate increase we're looking at in the next year is meager," he said.
Jacobsen said student loan debt is very high, which can leave graduates who have big loans less qualified for car loans and home loans.
"Instead of graduating and then getting the new car or getting a down payment, some of those life stages will have to be postponed. I don't think those dreams of a new car or home will have to be abandoned, just delayed," he said.
Still, Jacobsen said, "The spending we have looks much more sustainable than the spending splurge of 2004 to 2007."
Both Halechko and Magulski said their financial institutions are seeing a rise in home equity lines of credit, too.
From the first to second quarter this year, funding of home equity lines of credit was up 31 percent at Associated Bank, Halechko said.
"People who have lines with us — lines of credit that they might have had for two or three years that they didn't do anything with — now we're seeing an uptick in line utilization as well," Halechko said. "So it's not just new lines we put on the books, but also lines that have been around. People are saying, 'You know what, money is not going to get cheaper, so let's take advantage of that.'"
