Auto Sales Are About To Choke: Increase In Non-Revolving Credit Is Smallest In 4 Years

Tyler Durden's picture

Moments ago, the Fed released the latest, November, consumer credit data: it was not good. Rising by just $13.95 trillion, it was a big miss to the $18.5 trillion expected, and below the $15.6 billion downward revised increase in October. In fact, three months after the historic surge in September to the highest print in the revised series, total consumer credit has tumbled to the lowest since January.


But the big problem was not in the total data, but in one of the two key component data sets.

Recall that a few days ago we noted something very disturbing for US auto makers: for all the hoopla around the auto sales number, US domestic car sales had actually dropped to a 6 month low, missing estimates by the most since 2008.


What was just as disturbing was that "plans to buy an auto" had tumbled the most since January of 2013.


Lacking the most recent credit data, we did not know what may have caused this dramatic slowdown in auto purchasing, and intentions. Now that we have the data, we also have the answer, because while revolving consumer credit rose at a respectable pace of $5.7 billion in November, it was that all important "other" series, non-revolving credit - the source of funds for student and auto loans - where there was a dramatic slowdown.

As the chart below shows, after rising by $15.5 billion in the month before, and a near-record $22 billion in September, the November increase in nonrevolving credit was a paltry $8.3 billion - this was the smallest monthly increase in this most important for US car makers data, since February of 2012!


Suddenly both the slowdown in December car sales, and the collapse in buying intentions makes all the sense in the world: US consumer may have just had their fill of auto-related loans, and without these to fund future purchases, even on the most relaxed terms in auto loan history, the pace of current and future purchases will collapse.

And, as we showed earlier today, this collapse in auto loan issuance could not have come at a worse possible time: the chart below shows that the motor vehicle inventory-to-sale ratio is now the highest since August 2008:


As we said this morning, "the channel-stuffed "see how well we are doing" smoke and mirrors of credit-fueled malinvestment has hit a wall and yet the automakers - afraid to signal any chink in that armor - kept producing."

And now we know why nobody was buying: suddenly the car loan issuance pipeline has been shut half way.

The conclusion: unless there is a surge in non-revolving debt in December and the coming months, the cheap debt-funded US auto renaissance is officially over. As for the follow up question, whether this was caused by a revulsion toward more debt, then the rate hike in 2015 which was immediate passed through to borrowers, will make sure that what is currently a half-shut credit pipeline, will slam shut in the coming months and choke the only sector in the US manufacturing economy that was still relatively vibrant.

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Took Red Pill's picture

Quick! Let's bail out the car manufactures again.

Clueless Economist's picture

Mexican Drug Lord El Chapo captured!!!!   Was working in a taco bordega in North Philadelphia.

GeezerGeek's picture

"Was working in a taco bordega in North Philadelphia."

It figures. Immigrants get all the good jobs, especially the illegal immigrants.

DownWithYogaPants's picture

Dear Author:  Appears you were not careful with your billions and trillions units at the beginning of the article.

poland spring's picture

Wow, working in the worst location of all of Philadelphia.

Hitlery_4_Dictator's picture

I'm almost ready to say the FED has pulled the pin, -112 right now.

Remember I did say almost. I could very easily be wrong, and suspect I am. 



FreeShitter's picture

+400 sometime in 2016 just say that and yes ratt/motley crue concerts back in the 80's were just about as good as life got when we were young.

Hitlery_4_Dictator's picture

Honestly, I have no idea, never did, never will.  First concert was Black Sabbath 1995, followed by Metallica 10th row seats. I saw Pantera in 1995 too. 

FreeShitter's picture

Good shit right there.....Pantera is a Texas/Lousiana band...but the women in the 80;s with the teased hair and HUGE natural tits at those concerts were Heaven...for me Life peaked in 1989 lol.

Dog Will Hunt's picture

Metallica '98 here.  I dropped two tabs of acid and had sex with what I thought was Scary Spice.  Turned out to be a burn barrel.  Same diff.   

DetectiveStern's picture

Metallica is not my idea of acid friendly music.

skinwalker's picture

Actually you'd be surprised. I used to trip to metal reguarly, although I'll admit there are better genres out there for it. 

stant's picture

Aerosmith 76 or something ,can't remember I think coke still had coke in it then

MoHillbilly's picture
MoHillbilly (not verified) Hitlery_4_Dictator Jan 8, 2016 4:18 PM

Ice -T ( Body Count) Metallica, Guns and Roses,   Arrowhead,  K. C.   93   I have been told I was there

starman's picture

$15,000 off a new Hyundai in Los Angeles! 

Let me repeat that , fifteen thousands dollars off a new Hyudai! 

Thats a smokin deal on a 35k car! 

DrZipp's picture

So you end up paying $20k for a car worth $15k?

glenlloyd's picture

Yes, worth $15k on a good day, AND you hand over your privacy too since they can track you via skynet anywhere you go.

Go a tad over the speed limit? get a wittle ticket. Eventually will all be done from the air, no patrolmen left.

Janet Shalom Bernanke's picture

ummmm..... analysts will claim that the customers have surprisingly been paying all cash.  then upgrade the sector!



813kml's picture

"Rising by just $13.95 trillion, it was a big miss to the $18.5 trillion expected"

Those typos will look right in about a year.

Bastiat's picture

What's a few orders of magnitude among friends?

813kml's picture

It depends on whether your friend is a size queen.

orelius's picture

If queen had balls she would be a king.

arbwhore's picture

A quadrillion here, a quadrillion there, pretty soon, you're talking real money.

yogibear's picture

Next Obummer offers Cash for Clunkers #2?

Debt clock says 18.85 trillion.

See if Obama can run the debt over $20 trillion before he exits out office, to get Hillary elected.

bamawatson's picture

slump in car sales is due to weather

Winston Churchill's picture

Yep, its the whether allright.

813kml's picture

Whether or not to pay the light bill.

surf0766's picture

The debt ceiling was already removed

Vendetta's picture

the debt ceiling is just used as a prop to make people think the government isn't out of its mind

KnuckleDragger-X's picture

Time to show our patriotic spirit, and buy a Chinese Buick......

Squid Viscous's picture

Phil the Bowl will spin this positive monday am on CNBS, wait for it

buzzsaw99's picture

It was me. I got tired of the 2% IR so I paid it off early. Those maggots think they're gonna pay me zirp while I pay them 1.99%? Don't think so.

Chris P's picture

It seems like the flow of the money into retail hands slowed for sure in 14&15. You could see where the money was waiting for the big returns from new car buyers.  If you were able to go to the Fed window and borrow for free and then make new car loans that was some RTI....

Newbie lurker's picture

The PPT is really trying to hold 16400

wmbz's picture

One of our clown type local car dealers dances around yelling on TV telling all that he will pay off their credit cards (up to $10,000.00) and make their payments for one full year.

Pay off their current underwater car etc... The sheep line up bent over, ankles grabbed and walk backwards into the deal of a lifetime!

Shit drives me crazy, but the dimwits do it over and over again.

hockey7's picture

Look at the nonseasonal adjusted employment  numbers.   The NFP was up 11,000, and the HHS was down 63,000 with 337000 job losses in the 25-54 yr old category. The seasonal adjusted numbers make everything look great,  but it's tough to buy a new car if you just can fired but are still defined as employed when seasonally adjusted. 

tryinsohard's picture

There is a larger issue than just inventories.

A few years ago a new car sale represented a purchaser PAYING for about 1/4 of a car each year - since payment schedules were typically 36 to 48 months (remember the days?)

NOW a new car sale represents somebody buying 1/5 of a car or less each year - if you look at what consumers are BUYING, rather than what auto manufacturers are selling, auto purchases are about 80% of the previous high.


poland spring's picture

No joke, Nationwide:


Current new car loan interest rates

Term APR* as low as

Up to 36 months 3.53%

37 - 48 months 3.38%

49 - 60 months 3.1%

61 - 72 months 2.99%

73 - 84 months 3.25%

*APR refers to Annual Percentage Rate. APR effective as of 1/8/2016


Depending on your loan amount, you have several term options for your new auto loan.

Loan amount Terms available

$25,000+         Up to 84 months

$12,000+ Up to 72 months

$5,000+ Up to 60 months

NotApplicable's picture

Only a "trees growing to the sky" type person could fail to see the saturation of the new car market. Hell, my credit union parking lot never has less than a dozen repos sitting in it.

So... the only way to kick this can again is for fedgov to borrow the money for us, then give the cars away.

Ajax_USB_Port_Repair_Service_'s picture

There were some truly amazing new car purchase incentives available through January 3rd of this year. I don't know what the manufactures could do to top this last round of incentives. Anyone in the market for a new vehicle probably took the hook already. Also, there will be a flood of low mileage off lease vehicles coming into the pipeline soon. These off lease vehicles will be sold as dealer certified used cars. Why buy new? Trouble on the way for new car (and truck) sales.

Yen Cross's picture


  I need to give an H/T to Kevin O'Leary for being " man enough" to understand his mis-calculations with OIL, and Equities prices during Q-4---'15.

He said he was wrong, and I appreciate that.

 That being said, he just doesn't seem to be able to put his head around, the greater macro issues.

 The Fed. is trying to wind down their balance sheet, and energy costs remain low. Let's discuss all those tankers[ships parked] laden with CL as storage components?



TheSkipper1967's picture

Just sold my 2003 F350 7.3L Diesel to a guy for his lawn care business.  He didnt want to buy new.  I paid off debt with the money and drove a 98 Explorer my dad gave me.  I just bought a 98 Honda Accord and put in a new clutch myself.  Gave the Explorer to my highschool daughter.  All of those cars are in great shape and will drive for more years.  Parts are cheap on the two I have and I got rid of the expensive maintenance one.  Insurance is also cheap.  Allows me to focus on the important things like lead, silver, and food storage. 

silverer's picture

Manufactured landfill.

Rentenmark's picture

This is nothing 120 month car loans can't fix.  Buy on!