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Risky Loans Are 'Driving' US Auto Sales: 3 Charts
To be sure, we’ve made no secret of our views on the state of the US auto market.
This year, we’ve written extensively about the proliferation of subprime lending, worrisome trends in average loan terms, and, most recently, we noted the astounding fact that in Q4 2014, the average LTV for used vehicles hit 137%.
We presented what perhaps marked our most unequivocal statement to date on why the market looks dangerously frothy in “Auto Sales Reach 10 Year Highs On Record Credit, Record Loan Terms, & Record Ignorance.” In that post, the absurdities plaguing the US auto market were laid bare for all to see. Here’s a recap:
- Average loan term for new cars is now 67 months — a record.
- Average loan term for used cars is now 62 months — a record.
- Loans with terms from 74 to 84 months made up 30% of all new vehicle financing — a record.
- Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
- The average amount financed for a new vehicle was $28,711 — a record.
- The average payment for new vehicles was $488 — a record.
- The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.
It’s against this backdrop that we bring you the following three charts from BofAML’s H1 review of trends in the ABS market. As you’ll see, below, the move towards riskier lending is quite clear.
First, note that auto ABS issuance is set to hit record highs in 2015.
Next, consider that the percentage of prime loans backing new supply is now at an all-time low.

Finally, here’s a look at the percentage of new financing extended to non-prime borrowers. As BofAML observes, the prime segements are losing share.
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Disturbing.
Hand me another beer cousin.
And that post perfectly summed up my attitude over the last few years. Minimalist poetry right there. You sir, are awesome.
You flatter me for no good reason, cuz.
Did you bring beer?
I have some. IPAs OK?
FREE GUBMINT SHIT!!!!!!
"Free!!!!"
(In the end gubmint - the few remaining who pay taxes - will pay for this.)
A nation of imbeciles
This is an old story at this point. And auto sales are slowing anyway. But they would have to since the demand side has not been addressed.
Fook the auto companies and the not so horse they rode in on.
news fact 2018.
Banks now selling pre-owned vehicles. Come on down to honest Bibi's pre-owned vehicle lot and see them give away govment subsidized vehicles.
Please note: Cash or bit coin is the preferred payment method. Loans can be arranged at a modest interest rate.
Banks selling pre owned homes and buildings, pre owned vehicles, soon enough, pre owned people.
Don't worry about it. Janet will buy the loans in the first days of QE4
If the New York Stock Exchange cannot open come Monday...say..."for the rest of the week"...
that is all Jack Jew and Interplanet Janet actually.
Governor Huomo will be flaming out on Fire Island if that happens...
Interesting to follow the prices of the all electric Nissan Leaf.
Pick up a used one for 7-8 grand.
Range might be only thirty miles but you'll never need gasoline again.
"Someone will slap a solar panel on there" at some point.
You'll never use gasoline again at that point.
They just increased the range on the new one by a third too...a hundred miles give or take.
Who drives more than a hundred miles a day?
Putin ain't the only one popping the popcorn here.
"That range increase came as a surprise to the market."
The redesign comes out NEXT year.
"Then we'll be talking 180 miles" apparently.
Meanwhile my truck will go 400 miles haluing a literal ton of cargo.
My truck will go 500 miles on 10 gallons of diesel.
(1981 diesel VW pickup)
But why would you finance a new car? What's wrong with buying used? I don't understand.
lookit the financing length of used cars, in the article.
I did. Why would you finance a used car? Every car I've ever bought, and there have been several, was bought for cash. Yes, that meant driving crap in my youth. I did it, anyone could.
Financing a car makes zero economic sense, and yet people do it. It's something I will never understand.
Not really. I financed a new vehicle at something like 1%. I needed a reliable vehicle for my job and couldn't afford plopping down 25K cash. It's paid for now and I'm getting my "free" years out of it now.
"First, note that auto ABS issuance is set to hit record highs in 2015."
It won't be confined to subprime.
I'd like to take a moment to bash the auto insurers. There's a commercial tthat shows some sap in front of the statue of liBerty complaing he "dropped 40k on a new set of wheels" then got totaled right away. Dude was mad InSuRance co. didn't pay for replacement because it depreciates overnight. He then goes on to tout some other awesome company that's better, but fails to ask why premiums never go down. DUH!
exactly, lost 15k when he drove off the lot, pure comedy anyone that buys a new car, financed or not
And the number of people of who actually know how to work on cars, take care of them, and so forth hits a record low.
Works for me. (well, at least until it all comes undone as a result of the massive stupidity. hmmm... actually it might even work after the S hits the fan too considering skills and tools don't evaporate like government promises and bank money [unless we go mad max. but... might work then too but would require war paint, chaps, and wierd baby head helmets and such which I suppose would be okay, just not my preferred style. hmmm.]).
I asked my former insurance agent what the parent company's annual budget was for advertising?
Silence was all I got.
I told him I wasnt supporting stupid fucking commercials geared at minions with sub 100 IQ's with my premiums and walked out the door.
What? You refuse take insurance advice from a cartoon duck? Very narrow minded of you Mr. Bunghole!
I'm gonna start taking all these high risk loans. What the hey? I always wanted a Mustang Shelby GT with afterburners. I mean if all those solar companies Obama gave millions to went kaput, I want my share.
Why go so small? Imagine big and start small is not a bad philosophy.
http://www.complex.com/sports/2012/11/the-25-fastest-street-legal-cars/m...
Damn, I'm gonna have to take out several loans. Can I use the first car as collateral for the second and keep going from there?
Till recently I has 21st Century Insurance. Before them I had Allstate, before them Geico. Back in 2003 I had Geico and I hidroplaned my 2000 Chevy silverado so I used what I got back from Geico for my Chevy and bought a new 2003 Silverado. Shortly after the accident, Geico started ramping up my six month payments. When your in any accident, the first thing other insurance companys ask is if you had any accidents within the past three years. So for three years I was stuck with Geico and finally after the three years were up, Allstate calls me and my six month premium went from $700 to $300. At that time I was happy with Allstate untill they started to do the same shit Geico did. When my policy went to $400 for six months, I switched to 21st Century. Well needless to say after a year or so, 21st started pulling the same shit. My last payment for six month was just over $300 and the new payment would have been $351. I called 21st and gave them a chance to lower it but they gave that old excuse the state was raising rates. Well I call State farm and now my new payment for six months is $254. I have no doubt State Farm will be raising the rates in time and then I'll say byebye to them. Too many folks just look at the new payment and think there nothing they can do. I often get calls now from Allstate telling me how they can save me money by switching. Imagine had I stayed with Geico about eight or nine years ago. I'd be paying at least $1000 every six months. As they say, it pays to shop around.
A $ 70K Suburban financed for 7 years will probably have 140K miles on it and be worth about $ 14K when it's all said in done. and POOF! it's gone!
i've been driving since 1965. back then we didn't even have car insurance on our vehicles, it was optional! my dad looked at me & said, "this is a junk car, we're not getting insurance on it." there were no safety belts in the cars, no air conditioning unless you wanted to pay more for the car, there were no power windows either; we rolled the windows down by hand. and, when we parked the car behind the store we left the car keys in the ignition so we didn't lose them !! & if we wore shorts, we stuck to the car seats in the summer. and, gasoline was 17cents/gallon, paid for with two silver dimes. AND, WE WERE ALL JUST FINE ! if we wrecked the car, we walked until we could save enough money to purchase another one.
May as well take two cars, it will be impossible to reposses them all. May as well give them away.
I bought a 1981 GMC for $500.0, took the intake and carb off and replaced it with a 60s intake with no EGR valve or emissions spaghetti. I put an 850 Holly on, new battery, new tires all around, some primer n paint, and drove that truck for over a decade with no maintenance whatsoever after that except a tweak on the distributor. In the end, I cracked a head, and then the transmission started to go so I sold it for $80.0 to a wrecker.
cha-ching
Mrs. Hornet works for Toyota Financial. Says almost all the loans they are making now are sub-prime. That's all that is trying to buy a new car. They still send a lot of people off to Santander and Capital One.
The old man's house in 1969 - brand new, was $25k. 3 Bdrm, 2 bath, 1600 sq. ft. Hard to believe the average price of an automobile today is that same price - who knows, perhaps more... New cars back then I think were around $2500 - $5k. For the people who had 'arrived', a 1969 Cadillac El Dorado put you back ~$7k. Imagine that...
What happened to our $purchasing power...? What is going to happen when 30+ years of the future-pulled-forward-consumption comes to an end...?
Don't look at me I pay cash for my cars and only buy used 2 or 3 year old cars with very few miles on them 20k or less. I let other suckers believe the new car myth and take the huge depreciation hit.
Don't look at me I pay cash for my cars and only buy used 2 or 3 year old cars with very few miles on them 20k or less. I let other suckers believe the new car myth and take the huge depreciation hit.
worth saying twice.
Debt is a (cabal) capitalists weapon.
They make common people in debt (actually deliberate subprime), then they declare themselves as bankrupt but TBTF then they ask govt. for free money (QE).
Debt has become a tool for easy money
(lots of it)
This is the result of blind faith in capitalism , which has degraded into CRONY CAPITALISM.
(Because they help politicians get elected with money contributions)
Govt. cannot ignore them, so who has to suffer?
The people
Is this what democracy has become?
Demoncracy? Mammoncracy?