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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!

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Mon, 10/06/2014 - 11:23 | 5294405 JulienFR
JulienFR's picture

tic tac tic tac

Mon, 10/06/2014 - 11:24 | 5294412 Haus-Targaryen
Haus-Targaryen's picture

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.  

Mon, 10/06/2014 - 11:35 | 5294479 walküre
walküre's picture

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

Mon, 10/06/2014 - 11:42 | 5294501 nuclearsquid
nuclearsquid's picture

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.


Mon, 10/06/2014 - 11:43 | 5294514 walküre
walküre's picture

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

Mon, 10/06/2014 - 12:34 | 5294642 SoilMyselfRotten
SoilMyselfRotten's picture

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?

Mon, 10/06/2014 - 12:39 | 5294714 SoberOne
SoberOne's picture

Maybe the reason platinum has been tanking? 

Mon, 10/06/2014 - 12:50 | 5294750 TBT or not TBT
TBT or not TBT's picture

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.  

Mon, 10/06/2014 - 13:35 | 5294966 Landrew
Landrew's picture

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!

Mon, 10/06/2014 - 11:46 | 5294528 NoDebt
NoDebt's picture

"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.

Mon, 10/06/2014 - 15:27 | 5295612 Joe A
Joe A's picture

It is misspelled. It should be 'Amy screws cunts', the cunts being the sheep.

Mon, 10/06/2014 - 11:35 | 5294480 casey13
casey13's picture

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.

Mon, 10/06/2014 - 11:45 | 5294526 nuclearsquid
nuclearsquid's picture

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.


Mon, 10/06/2014 - 13:37 | 5294983 Landrew
Landrew's picture

Interesting, can you explain what you know and how it is different then the reported story?

Mon, 10/06/2014 - 14:17 | 5295220 MachoMan
MachoMan's picture

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.


Mon, 10/06/2014 - 12:05 | 5294602 cornedmutton
cornedmutton's picture

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.

Mon, 10/06/2014 - 11:39 | 5294492 syntaxterror
syntaxterror's picture

I bet it doesn't drive better than a new GT86

Mon, 10/06/2014 - 11:42 | 5294508 Haus-Targaryen
Haus-Targaryen's picture


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.  

Mon, 10/06/2014 - 12:19 | 5294651 Rubbish
Rubbish's picture

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

Mon, 10/06/2014 - 13:15 | 5294823 glenlloyd
glenlloyd's picture

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.

Mon, 10/06/2014 - 14:21 | 5295237 MachoMan
MachoMan's picture

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.

Mon, 10/06/2014 - 11:25 | 5294415 LULZBank
LULZBank's picture

Actually its, tick tock... tick tock...

Mon, 10/06/2014 - 11:28 | 5294432 SHEEPFUKKER

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?

Tue, 10/07/2014 - 07:23 | 5297987 de3de8
de3de8's picture

Unless he has bad breath

Mon, 10/06/2014 - 11:28 | 5294434 edifice
edifice's picture

Toe. Johnny, tell him what he's won!!





Mon, 10/06/2014 - 11:34 | 5294467 williambanzai7
williambanzai7's picture

Mon, 10/06/2014 - 11:35 | 5294475 JLee2027
JLee2027's picture

Are these subprime loans with the remote auto disable that should be outlawed?

Mon, 10/06/2014 - 11:44 | 5294524 nightshiftsucks
nightshiftsucks's picture

All right I'm drunk but not wasted,is that tic tac or tic tock ?

Mon, 10/06/2014 - 11:46 | 5294536 PrecipiceWatching
PrecipiceWatching's picture

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.

Mon, 10/06/2014 - 12:41 | 5294719 starman
starman's picture

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 .

Mon, 10/06/2014 - 11:24 | 5294410 LULZBank
LULZBank's picture

Subprime is contained.

Mon, 10/06/2014 - 11:28 | 5294440 Bunga Bunga
Bunga Bunga's picture


Mon, 10/06/2014 - 11:34 | 5294471 yellowsub
yellowsub's picture

Contained like ebola or contained like Fukushima?

Mon, 10/06/2014 - 11:25 | 5294416 NaiLib
NaiLib's picture

It wll be very cheap to buy a Ferrari or Porsche in a year or two

Mon, 10/06/2014 - 11:26 | 5294425 Haus-Targaryen
Haus-Targaryen's picture

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.  

Mon, 10/06/2014 - 11:35 | 5294474 bpj
bpj's picture

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.

Mon, 10/06/2014 - 11:38 | 5294490 walküre
walküre's picture

Unless you live in Europe and have access to their Autobahns or Autostradas owning a performance car makes no sense.

Mon, 10/06/2014 - 11:43 | 5294511 Haus-Targaryen
Haus-Targaryen's picture

I live and work in FFM 

Cruise control at 180 KPH is a nice feeling.  

Mon, 10/06/2014 - 18:34 | 5294887 PrecipiceWatching
PrecipiceWatching's picture

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.



Mon, 10/06/2014 - 15:23 | 5295586 Joe A
Joe A's picture

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.

Mon, 10/06/2014 - 12:02 | 5294588 awakeRewe
awakeRewe's picture

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.

Mon, 10/06/2014 - 11:27 | 5294427 order66
order66's picture

"You think you hate it now....wait till' you drive it"

Mon, 10/06/2014 - 11:27 | 5294428 alexcojones
alexcojones's picture

Once the Great Depression 2.0 hits ALL nice cars

Will be on sale, as the were in 1931


Mon, 10/06/2014 - 11:30 | 5294448 Haus-Targaryen
Haus-Targaryen's picture

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.  

Mon, 10/06/2014 - 11:28 | 5294435 SpanishGoop
SpanishGoop's picture

All total write-offs.

The loans, not the cars.



Mon, 10/06/2014 - 11:33 | 5294466 viahj
viahj's picture

so, I should take out a small business loan, fiannce an impound lot and a new tow-truck.

Mon, 10/06/2014 - 11:39 | 5294497 walküre
walküre's picture

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.

Mon, 10/06/2014 - 11:37 | 5294484 disabledvet
disabledvet's picture

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.

Mon, 10/06/2014 - 11:28 | 5294437 TheFreeLance
TheFreeLance's picture

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.

Mon, 10/06/2014 - 11:32 | 5294460 Haus-Targaryen
Haus-Targaryen's picture

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." 

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