What Bubble? Record $924 Billion In 65 Million Auto Loans: 31% Of All New Loans Are Subprime

Tyler Durden's picture

And now for something funny.

Earlier today, credit agency Equifax piggybacked on Experian's auto loan data, and reported the following:

  • The total balance of auto loans outstanding in August is $924.2 billion, an all-time high and an increase of 10.8% from same time a year ago
  • The total number of auto loans outstanding stands at more than 65 million, a record high and an increase of more than 6% from the same time last year;
  • The total number of new loans originated through June is 12.5 million, an increase of 4.9% from same time a year ago
  • The total balance of new loans is $254.2 billion, an increase of 6.9% from same time a year ago and representing nearly half of total new non-mortgage credit originated
  • The total number of new loans originated year-to-date through June for subprime borrowers, defined as consumers with Equifax Risk Scores of 640 or lower, is 3.9 million, representing 31.2% of all auto loans originated this year.
  • Similarly, the total balance of newly originated subprime auto loans is $70.7 billion, an eight-year high and representing 27.8% of the total balance of new auto loans
  • Year-to-date in June, the average loan amount for borrowers with risk scores of 680 or lower are increasing the most, showing a 3% increase from the previous year. Loan sizes among borrowers with risk scores of 760 or higher show little change from the same time a year ago

At least we now know, definitively, what the reason for the US manufacturing surge in the late spring early summer was: a subprime credit-driven car buying binge.

But wait, there's more: because here is Equifax' "conclusion" based on the above bullets:

"Auto sales continue to soar, crossing the 17.4 million mark on an annualized basis for new cars and light trucks in August," said Amy Crews Cutts, Senior Vice President and Chief Economist at Equifax. "The abundance of high-quality vehicles for sale, the attractive financing options available, and the ever-increasing age of cars on the road today have created an environment that makes it easy for consumers to say 'yes' when it comes to purchasing a new or used car. Importantly, auto loan originations to borrowers with subprime credit scores remain stable, providing additional evidence that a bubble is not occurring in that space."

To summarize: to Equifax a record car loan bubble with an 8 year high in subprime origination is "evidence" that there is no bubble.

And... #Ref!