NY Fed: Auto Loan Delinquencies Rising in the “Sub-Prime” Market

New York, NY – 21 November 2017 – The growth in household debt can be attributed, at least in part, to the growth in auto loan balances, which have increased for 26 consecutive quarters as a result of new loan originations. In the aggregate, there are apprx. $435 billion worth of auto loans outstanding that were made to consumers with a credit score below 660.

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Subprime Auto Loan Losses Reach Highest Level since the Financial Crisis

Subprime net loss rate in auto bonds rose to 9.1% in January

U.S. subprime auto lenders are losing money on car loans at the highest rate since the aftermath of the 2008 financial crisis as more borrowers fall behind on payments, according to S&P Global Ratings.

Losses for the loans, annualized, were 9.1 percent in January from 8.5 percent in December and 7.9 percent in the first month of last year, S&P data released on Thursday show, based on car loans bundled into bonds. The rate is the worst since January 2010 and is largely driven by worsening recoveries after borrowers default, S&P said.

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The Next Financial Crisis Might Be in Your Driveway

With late payments on the rise, a dealership upsell begins to look dangerous.

Lured by low interest rates, low gas prices, and a crop of seductive vehicles that are faster, smarter, and more efficient than ever before, American drivers are increasingly riding in style. Don’t be fooled by the curb appeal, though-those swanky machines are heavily leveraged.

The country’s auto debt hit a record in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion. The combination of new car smell and new credit woes stretches from Subarus in Maine to Teslas in San Francisco.

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Auto Loan Losses at Six Year High – Fitch Ratings

AL_losses_ftch

Banks’ loan losses from car financing have risen to a six-year high, new figures show, as the patchy labour market and the mining slump causes more borrowers to fall behind on their payments.

Fitch Ratings says the proportion of automobile loans that suffered a loss after lenders sought to repossess the vehicle rose to 0.62 per cent in the June quarter, the highest level since the index started in 2010.

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