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Presenting America's $900 Billion Auto Loan Bubble In 6 Charts
We haven’t minced words when it comes to our take on the US auto market. What’s abundantly clear from the numbers is that lenders are relaxing their standards and that this is in part driven by the same dynamic that steered the US housing market to dizzying heights in the lead up to the financial crisis. Here’s a recap (complete with bad puns):
The much maligned "originate to sell" model - which was instrumental in making the American homeownership dream a reality for underqualified borrowers in the lead up to the crisis - is alive and well and is 'in the driver’s seat' so to speak when it comes to auto sales in America.
As we noted last month, in the consumer ABS space (which encompasses paper backed by student loans, credit cards, equipment, auto loans, and other, more esoteric types of consumer credit) auto loan-backed issuance accounts for half of the market and a quarter of auto ABS is backed by loans to subprime borrowers.
The push to feed the securitization machine begets more competition among lenders for a shrinking pool of creditworthy borrowers and when that pool dries up, well, the definition of "creditworthy" must necessarily be relaxed, otherwise the securitization machine stalls for lack of fuel.
By the numbers (Q1 data from Experian):
- 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.
In light of the above, consider the following charts from Experian which demonstrate, beyond a shadow of a doubt, that despite the fact that delinquency rates are largely flat, an enormous amount of risk is building behind the scenes in the automotive finance market.
The percentage of vehicles financed (both used and new) has risen steadily...
...while the percentage of used models without loans has declined markedly...
...and the non-prime segment is gaining share...
...while average payments and average total amount financed rise...
...and the total loan balance for the market nears $1 trillion...
* * *
But don't worry, because as we noted last week, someone you can trust has now been appointed chairman at one of the market's major players...
(Note: this chart was slightly modified from its original version)
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Sounds like blow job for Blythe Masters...
Saying her own name into the microphone might feel better then you think
With those nice furs, she must be the best on the block.
$25 blow jobs every five minutes can net her a SHITLOAD'a bread in an average 8-hour work day. Roll up dem sleeves, byotch~
"The average car loan payment, if instead invested growth stock mutual funds over the period of the loan, and then left for 10 years, will result in roughly 1 million dollars. HOPE YOU LIKE THE CAR!" --Dave Ramsey
Yea, but, Escalade!
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These won't last long! Show them at Walmart who you are! Impress the door greeters.
You deserve no less then TWO, not one but TWO brand new Escalades!
And if you buy within the next 30 minutes, we'll throw in a FREE double-wide Scooter!!
Call Now!!
Im just about finished after almost 2yrs now of hard labor and 44k lighter in the pocket, but my 56 Cadillac Coupe De Ville (one like Mariylyn Monroe's navy blue one) is almost done. Sound dampening undercoat makes it so quiet you are not sure if it's running. Has an automatic headlight dimmer (1950s high tech). I had to send the trans to California to one of only two guys I know that know how to work on them.
Its eats up the road like the all metal brick shithouse she is with so much chrome it hurts you eyes to look at it in the sun. Baby blue and Corvette white exterior with white diamond tuck interior , Biaritz wire spokes and a trunk big enough for two people to frolic in. But, everytime I drive it to town I can't slow down because pussy keeps wanting to stick to the side of it.
Zero payments, zero plastic, zero tracking devices, everything down to the bolts restored for less than a new plastic POS car would cost
Fuck a new car..
Photo or it does not exist but in your mind
Whatever friend.
but since your popping your gums where do you want it sent.
.
If that's an accurate statement, it's fairly jaw-dropping.
How to drive free, new cars for life: https://youtu.be/BKyV8CTHeJ0 (Another Dave Ramsey joint)
ramsey assuming stock market goes up for next 17 years the way it has for the last 6.
even then, a loan of say 30k in a fund doubles what, every 7 years? thats 120k
and people probably need a car, its whether they need a new 30k car or a 20k car.
This is why I buy nice--take good care of it-and keep it for 13-15 years when technology changes enuf to warrant a new car
Why doesn't GM offer cars + stock at low low terms. Buy one GMC pickup and get 500 shares of GM stock! Solves two problems at once.
Bullshit.
AVERAGE payment $488?
how long till j6p demands lower monthly (ie: a 10yr ... 12yr?)??
what's 900 billion between friends?
<<the average amount financed ... $28,711 >> WTF?!?
It makes me think of those insurance commercials, where the rtard is asking why his 30K truck depreciated, why his insurance company doesn't want to pay him the sale price after he totaled it. The punchline is something like 'maybe you need a new insurance company'. I always think 'maybe you can't really afford 30,000 worth of truck'.....
Sure, and the cost for that premium isnt any higher than a regular policy.
I wont cum in your mouth, either.
My car depreciates, why does not the cost of my car insurance??
Holy F'ing shit - just think of all the starving hookers and dealers
It's only a bubble if you don't die before it pops.
It's only a bubble if the Fed says it is a bubble.
Exponential growth.
The only people stupid enough to buy American designed and made cars are the Americans. Whoever accepts these car finance/loans terms, quite frankly deserve to be fleeced and extorted to the fullest.
Over here in the UK everyone is getting cars on lease you can get a brand new ford for £250 a month for 3 years. What is that car going to be worth when all these leases end the market is flooded with 3/4 year old cars in decent nick. Cars are getting really oversupplied and the prices are going to come crashing down soon. Could the China crash and loss of sales their be the pin that pricks this bubble?
You must live in middle-England. lol. In my part of the UK, nobody with more than half a brain takes on lease. Lease if for Merc, Audi, BMW, Range-Rover, Aston Martin, Porsche, Lexus et-al drivers. It is 0% interest everywhere on Vauxhall, Ford, Renault, primarily for the fact they struggle to shift their cars if they don't offer competitive terms. It's only people with bad credit who get fleeced in today’s car buying market in the UK, with parasites like Car-Giant and Car-Supermarket, able to charge 19.9% representative for their 2nd Hand, ex-rental, ex-lease motors.
This East Manchester. The subbyist of prime.
Just waiting for the subprime loans to hit the motorcycle dealers! Then I am going to hit the road and discover America!
hit the road and discover America......has not maintaind it's bridges, highways, biways or anything other infrastructure.
Keep an alternate route in mind where-ever you go.
one thing is for sure, immigrants, aliens and refugees had nothing to do with this fraud-just like the last frauds
Cars are a version of QE Flow. Open the veins of the PDs and keep the dream alive.
The twist is that all of the money loaned to the people to purchase autos is actually wealth stolen from the people by the banksters. The banksters' prior thefts undermine the economy, and the people's economic opportunities, which then fuels the need for the people to borrow from the banksters for transportation.
Will it be gnashing of teeth when the banksters come for their payments in SDRs from those that they have so thoroughly plundered, or guillotines for payment when the banksters come for their payments in SDRs from those that they have so thoroughly plundered?
The banksters need to repay us. Only gold, sliver, or heads accepted.
Liberty is a demand. Tyranny is submission..
Wooden platform and frame? One half ounce. Steel blade, anti-corrosive? One half ounce. Having a guillotine for collecting from the banksters? Priceless.
obviously this bubble isn't in Kansas City. It's still like a little Havana with everyone driving 20 plus year old cars
Yikes. I haven't had a car payment in 7 years... don't want one, either.
I went 20 years without one. Then my two 94's (paid off in 95) pretty much bit the dust. One died and one got t-boned. Now I have two 2013's I plan to drive for 20 years. One has a small payment but I pretty much started saving for new cars the day I paid them off in 95. I think I got my money out of them being the original owner....and the one that got t-boned would be going today if not for old women on cell phones running lights.
My wife's 2000 Mazda Protege was getting to the point that the upcoming repairs would be far more than the car is worth. So last October, we went car shopping. She had just inherited about $15,000 from her grandmother. She also will only drive a stick-shift. We live in Minneapolis so that makes more sense than it would in, say, San Francisco.
So when we went to dealerships, $15k burning a hole in her pocket, and told all the salespeople she would only drive a stick, they cleared out faster than...really fast things, and we had the lots to ourselves. They tried their perfunctory, "Have you considered a ($26,000) Camry? #1 car sold in America..." One guy told us automatics now get better mileage. When she didn't like the way newer models are shrinking the rear windows and enlarging rear roof pillars, dramatically cutting rear visibility to improve rollover test scores (how often does somebody actually roll a family car?), one salesman had the gall to say, "Well, 97% of the time you're just going forward in your lane, so that doesn't matter. My wife said, "Sure, but accidents don't happen when you're just going forward in your lane. It's when you change lanes or merge into traffic and you can't see behind or beside you that accidents happen." So, all the salesmen hated our guts.
She found a 2012 Toyota Corolla with 20,000 miles on it, paid cash, and drove it away with about $2,500 left in her pocket. They couldn't wait to get rid of us. While we were filling out the paperwork, the salesman got up and left a couple of times as hotter prospects came onto the lot. They had Zero, Zip, Nada, No interest in talking to us because we were going to buy what we could afford and pay for it on the spot. They were really pissed when they pulled our credit reports and saw the 819 FICO score, and realized we weren't going to borrow any money through them.
But hey, it's a great car. We'll put 80,000 miles on it over the next 10 years and do it all again, Lord willin' and the creek don't rise.
We're "Deadbeats."
I have been fortunate enough to pay cash for quite a while now. I have noticed you get treated like shit when you pull out the checkbook. Lot of money in F&I for these dealerships. I'm viewed as a pest and probably un american for not participating in the ponzi.
By not being able to afford a home anymore people go and buy new cars. Typical! Works for Keynesian economics though!
Chrysler (Fiat) seems to be raking it in,,, see more of those fake four banger chargers and challengers than you can shake a stick at.
I have to laugh every time one passes. Kowalski is rolling in his grave...
The balance sheet for a lending institution is opposite from the rest of the world. Here loans are assets. And since the ponzi scheme would collapse without fresh blood this news is probably good news for the vultures.
still drivin my 91 gmc sierra, extended cab pickup, 4x4 4.3 L, 4 speed w/od and cruise, no rust. anyway, most people that live in my state, their car/truck is their fucking home! like 50 inch spinner/spoked wheels, white wall tires, black one way glass, 100,000 mega watt hip hop playin....................................wtf
Sad thing is that a new F150, moderately equipped, is almost as much as I paid for my home 20 years ago. And my home comes with a bathroom, hot and cold running water and a workshed big enough to store four F150's in.
Besides, do you realize the depreciation your "new" vehicle takes when you sign on that line? Not to mention the Insurance and property taxes. Thanks, but I'll keep up my current vehicles and let someoe else take the initial depreciation in order to brag about their "new" car.
Wife has a friend that bought a used Infiniti with the 60 month payments, little down BS. She had to have an Infiniti, wife says. I told her she can't afford it and she asked why. I told her besides the ridiculous ass raping on the loan, wait until it needs repairs. You need a Civic or something useful and serviceable. She told me that's boring. Okay
Stupid, stupid man! You know better than to argue, or reason with the wife. Anything non-life threatening, or longterm financial, you let her deal with.
True story. My sister got her 2008 Toyota Corrolla T-boned by a Trailblazer, went airborne, and hit a Ram truck. Car was totalled, she has back pain. She just got her $7500 "first check" (whatever that means) through her lawyer. She went straight out and bought a nice "safe" Jetta SE 1.8 liter Turbo, whole deal was 26k. Put the 7500 for the downpayment. Here's the kicker. She doesn't have a job, the dealership said all she has to do is make the first 3 payments on it (so they get credit for the sale). The interest rate is 5.25%, term is 60 months. She has no job, no income to speak of, her loan is in her name, not her husband's. Fucking go figure. Meanwhile, my Civic has 242k miles on it, and the AC goes out, but it's paid for.
This is how the ponzi works. The worthless idiots get new cars.
Looks like all businesses in America are running on the model :
debt-->bankruptcy-->QE-->Free money
Its raining free money in America , print print print
TBTF