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What Bubble? Record $924 Billion In 65 Million Auto Loans: 31% Of All New Loans Are Subprime
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!
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tic tac tic tac
This makes me feel immeasurably better about my BMW. Paid for in cash.
Sure its 11 years old -- but still drives better than your brand new Toyota -- and while the rumor is they are expensive to repair -- if you do it yourself, its super cheap, and due to German engineering -- very easy.
all my vehicles are 10+ years and have 200+ k mileage
paid for, low insurance and decent gas mileage
don't need to impress my wife with a new car
new cars are a money pit
since when do subprime borrowers purchase new cars? I have a hard time believing that a solid used car market is enabling a new car market by buoying trade-in values. More likely that dealers are just raking in the spread with both hands.
there's no subprime on used cars
subprime on new cars with 96 months financing to make sure payments are as low as $150 / month or a couple bucks a day
buyers that sign these deals are never the sharpest tools in the box
Umm, lemme guess, we take all the sub-prime loans, bundle them up and sell them as triple-A securities all around the world. With derivitives we could surely turn that $928B into several dozen trillion dollars. What could go wrong?
Maybe the reason platinum has been tanking?
What is good for the UAW is good for their unionized unfireable political allies in government, and banks are fedgov's bitchez and enablers at the same time. At this point the TPTB don't even try to dress it up as anything else. GM is alive! (Like young Frankenstein declared of his monster) Fuck the UAW.
The problem for low income, need car to get to work people, was created by O'Bummer and his ignorant staff!They in the infinite wisdom CRUSHED all the used cars in 2009! You still can't find a used car of value! To buy a used car, is money down, higher rate and you over pay to get one! O'Bummer not much of a friend to working people!
"said Amy Crews Cutts, Senior Vice President and Chief Economist at Equifax."
That isn't a real name. No way. Somebody working for a credit bureau, making decisions on how close to shear the sheep is named "crew cut"? You're pulling my leg.
It is misspelled. It should be 'Amy screws cunts', the cunts being the sheep.
The new economy is based on purposfully loaning money to people that you know can't pay? Not what I learned in economics about how a sound economy works.
Tylers, I think you need to do some digging on this one. I have insider knowledge on the subprime auto finance market, and it just isn't a 'bubble,' for a number of reasons. I think the real hidden story is why the NYT is running a series trying to paint the industry as a boggie-man.
Interesting, can you explain what you know and how it is different then the reported story?
I know of quite a few local auto dealers who sold cars to people who never even made the first payment... repo'd within weeks from the sale... bullish.
Loaning money to someone who you KNOW can't pay is a form of loan-sharking and is illegal. At least that's what I learned.
I bet it doesn't drive better than a new GT86
Hmmmmmmm
It would probably depend on application.
The weight distribution of the GT86 is very front heavy, even though its RWD and has the same wheels and tires from the factory as a Prius.
So in the wet, or the snow, or going fast around curves without losing the backend -- BMW would still be better.
IF you want a back-end happy car -- then I would agree with you. GT86 is a superior platform.
Counterpoint --
Cheapest GT86 I can get my hands on here in Germany is north of 20k€ -- I paid under 5€k for mine.
I'm with you, got $3k into and Eldorado Caddy with 50k miles. At those prices I could buy one every six months. And the insurance is $30 a month...heh heh Lets race for pinks
Gold Bitchez Gold
The prestige to owning a new car is gone, anyone can borrow to buy a new car, the only difference is the rate a person pays on the loan.
New car dealers don't want to turn anyone away. If a potential buyer comes in they want the sale, the only difference is in the rate they pay to borrow.
I'm quite happy with my 18 yo car, which was paid for the day I bought it. It doesn't have all the fancy gadgets but then again it can't break because of the gadgets either. It's easy to maintain and I know enough about the platform it's built on to do that.
I also doesn't have all the nasty gps tracking crap or automated ign kill switch etc.
The only thing a toyota needs is about 1/10 of the required maintenance in the owner's manual... My old ass daily driver is about to go to the shop, but I'll buy all the parts online for dirt cheap and they'll install the parts... after a 150k miles, you spend a couple grand and it'll be good to go for another 75k+... no cheaper way to drive.
Actually its, tick tock... tick tock...
Perhaps he was alluding to the fact that this crazy subprime bubble(part 2 or whatever number we are on) doesn't pass the sniff test?
Unless he has bad breath
Toe. Johnny, tell him what he's won!!
A NEW CAAAAAR!!!
Are these subprime loans with the remote auto disable that should be outlawed?
All right I'm drunk but not wasted,is that tic tac or tic tock ?
I believe that is "tick tock", as in the time is counting down on this ongoing fiscal insanity.
That is, unless you were attempting a metaphor involving breath mints.
When you can purcuase any domestic car with a 7 year 0 interest loan you know things are great!
Untill you loose your job that is .
Subprime is contained.
likely?
Contained like ebola or contained like Fukushima?
It wll be very cheap to buy a Ferrari or Porsche in a year or two
Looking forward to getting a new M235i.
As fast as the e46 M3 CSL, and after the subprime thing explods, I figure I could get one of these on the cheap.
Owning a "performance" car in CA is risky business, doing 52 mph in a 40 cost me $460 and 15% increase on insurance for 3 years. Fuck it, I slowed down and quit caring about cars.
Unless you live in Europe and have access to their Autobahns or Autostradas owning a performance car makes no sense.
I live and work in FFM
Cruise control at 180 KPH is a nice feeling.
Yeah that culturally accepted following distance of 18 cm at 140 km/hr on the Italian Autostrada is so damn exhilarating.
Like continually tasting death.
No fucking thanks.
The Autobahn is overrated. Large stretches have been in a bad state for a long time. The last couple of years they have been repaired which meant that large parts were in reconstruction for a long time. There you are with your high powered Merc or Audi standing in the same queue as the other folk. Also annoying on the Autobahn is when Germans see a speed limit sign that says 'go 130 or 80' everybody hits the breaks because Germans are obedient people.
Based on my neighbors driving habits, the only thing you can do with a fast car in these ticket happy times, is rev the dam engine on his driveway. Pathetic.
"You think you hate it now....wait till' you drive it"
Once the Great Depression 2.0 hits ALL nice cars
Will be on sale, as the were in 1931
Unless you have some crazy "Gub'ment Will Refi And Pay Banks To Reduce The Principal On Auto Loans To Keep The Sheeple In The Cars Act"
Which wouldn't surprise me, and make me MAF I didn't get in on the gravy train.
All total write-offs.
The loans, not the cars.
so, I should take out a small business loan, fiannce an impound lot and a new tow-truck.
sorry, that business plan makes too much sense but is not sustainable long term because .gov will somehow screw this up too and you'll end up holding the bag - again.
Actually this is false. We know for a fact that the auto companies are too big to fail too so indeed while you have to be a total nut to be lending a trillion into a market where prices are collapsing the car folks will still be pumping out their shit mobiles courtesy of Uncle Salami.
They of course will be doing so for 5,000 bucks instead of 50,000 however.
Of course there is no bubble -- the banksters have the perfect vehicle (!), a depreciating asset that nonetheless can always be used to "secure" a lien and lay claim to SOME income stream. So what if that income stream is the result of part-time work at Wal-Mart? EBT and 15-year car note is the new American middle-class.
I can see it now:
You'll have our fearless leader on TV;
"Come on guys, Michelle and I owned our first car for 15 years. Instead of purchasing a car and paying for it in 5 years, while driving it for 10 -- the US Federal Government now subsidizes a 15 year auto loan, to allow you more money to take your kids on vacation, or purchase a home, which is the American dream."
Oh, there is even a better fix to create "demand" -- effectively outlaw every daily-driver vehicle from before, say, 1998. Remember, the SCOTUS said it is perfectly OK for the federal government to compel you to buy more health insurance than you want. Simple to apply that to vehicles as well.
two kinds of risk with auto loans. the first is default risk, the second is early payoff risk. both will come into play in this environment. the deadbeats will default, prime borrowers will pay off early. the same thing will happen with mortgages. imo the quality of auto loan and mbs portfolios will deteriorate over time until there is only garbage left.
looks like it's time for me to get a new Tesla!
My advice to Americans..
If your going to do this, do it right.
Buy the most expensive motor home, a pump shotgun and a watchdog.
You'll have a blast!
Thanks to remote tracking and shutoff technology, subprime auto loans are becoming slightly more profitable. Jist axe Uncle Warren.
And used car prices will collapse...
...last ditch grab for the consumer wallet before it vanishes (again) with the cyclical nosedive.
buckle up
In 1931, Packards, Auburns, Cords and Caddies went on sale.
I saw an old newspaper from 1935 listing some. Then in 1974-75 after the price of gas doubled, "Muscle cars" went on sale. Like these probably will.
10 Cars That Depreciate Like a Stock Market Crashso bullish
so juicy
Remote disable must be taking the fun out of being a repo man.
Meh, the automated ignition kill switch will keep those pesky borrowers in line when they are lat on their payments. What better way to make sure the bankers get paid than make sure Joe borrower can't make it to work.
but but .. that is not fair
banksters let us stay in our homes YEARS after going delinquent ...
And I am sure you can take a position against Joe borrower making it to work or not. And insure that as well.
this is for thru Q2 ... surely, things got better Q3 ... or not.
seriously, FDIC and OCC have warned on subprime auto lending.
And august blow out number? Quirks of month
5 fridays (payday) and 5 saturdays (when households generally purchase major durable goods)
Saturday the 30th and Sunday 31st were first 2 days of Labor Day weekend ... sales galore
So who are the key lenders in this market? anyone
Hello? You asked? Business is booming!
http://www.gmfinancial.com/
What can go wrong when .gov is backing the loans!
Ally Financial (the financing arm of Government Motors). The others are playing ball now, too, though.
real question is who are the bagholders?
a lot of this crap is securitized (ABS) and pawned off on dope institutions.
OCC making key point -
That said, concerns have begun to emerge related to subprime auto lending outside the
banking system and to loan terms more generally
http://occ.gov/news-issuances/congressional-testimony/2014/pub-test-2014...
AIG can't be that stupid. Or they expect to bailed out again.
Equifax, as well as the rest of the credit bureaus are just one big cog in the credit bubble. Just like the "ratings" agencies. Why would they wreck (pardon the pun) the auto loan bubble.
Read the article, did a double take at 'Amy Crews Cutts' and read again.
Amy Crews Cutts works for Equifax?
No she fucking doesnt, she cut my hair last week at 'Stop Taking The Piss Out Of The Plebs You Cunts' barbers in the shopping center near where I live.
Amy fucking Crews Cutts? Even I dont drink that much or sniff enough glue to be that fucking whacked to believe this fucking bollocks.
Crews Cutts? They be losing it boys.
;-)
The name is mispelled and should be 'Amy screws cunts'.
Let me guess tax payers are holding this bag? One more guess they are not picking up the defaulted cars as fast as one might hope.
Next they will start excepting EBT?
I went in for a Cruze and drove out in an Escalade.
The problem with subprime car loans is the deadbeats drive up car prices for all of us non-deadbeats.
This is also why a decent mattress is over 2K @ 50% off.
Subprime? Those are the ones with the killer rims.
Look at the bright side. Less channel stuffing. Park them in section 8 lots.
where they can be stolen, stripped or trashed, collect insurance, great scam!
who says these guys havent got it all figured out?
Well, if 27% of the new dollars are subprime how does that track over time. I worked at some regional banks 10-20 years ago where subprime auto loans accounted for < 5% of new loans.
Be curious to see the metric over time.
Before this bubble breaks again look for zero down mortgages to be available one more time!
subprime at a credit score of 640? since so many lost everything in bankruptcy when it all collapsed in 2008 and it's taken seven years to be working 2 jobs at minimum wage to recover, that 640 is a great score. When all the derogs fall off the credit report look for a 700.
The life of a repo man is INTENSE!!
Hey kid!! Hey!!! Hey!!! Want to make ten bucks?
Fuck you, queer!!!
PROFIT = SELL PRICE - COST
Learn some economics
The very reason subprime is needed is because COSTS of production is too high due to extremely high energy and raw material and high salaries costs and end buyers having no money to buy at prices making a profit.
The government has taken over the whole car production industry promoting car loans guaranteeing profit to loan providers.
That can continue until...........suppliers of raw materials reduce supply, because not getting paid. And they are reducing supply. Costs of doing business has skyrocketed. No profit unless government guarantees it
Wonder why there are recalls? You know why.
Cars are a government made product now. Nobody cares
When will the new Trabant come to the US?
Yes, the socialist parasites are destroying the country with give-away programs, including giving away not just confiscated earnings but also FED created money. But there is a good side for those of us who still have EARNED money - after the bubble pops, we will be able to buy used cars, trucks, RVs, boats, homes, again etc at very much lower prices.
Just wait until the POS in Washington try to complel the American people to bail-out subprime auto loans. It will be a sight to behold!
Obamaloans