Auto Lending Update - Someone Please Explain How This Is Not A Bubble

Tyler Durden's picture

Experian recently released their Q4 2016 Automotive Finance Market update which includes a lot of statistics that seem to confirm our frequently documented concerns about the sustainability of the current level of annual auto sales (see here, here and here for our recent notes on the topic).

First, there is the staggering growth of auto loans outstanding.  It should be readily apparent to almost anyone that a 21% expansion in credit issuance over the course of just two years likely implies there has been at least some degradation in underwriting standards.

Auto Loans

 

But you don't have to speculate as Experian lays out the facts...and, sure enough, the outstanding loan balances of "Deep Subprime" borrowers have increased by double the amount of any other bucket, other than the plain "Subprime" folks, of course.

Auto Loans

 

Of course, an impaired credit profile has, in no way, hampered America's entitled consumers' demand for driving around in style as average subprime loan balances actually exceed "Super Prime."

Auto Loans

 

But don't worry, those subprime borrowers can "afford" those loans because they simply offset higher interest costs with stretched out terms...

Auto Loans

 

...which keeps there average monthly payments low.

Auto Loans

 

But, despite all the financial engineering, a look at 60-day auto delinquencies around the country may imply that the auto party is slowly coming to an end.

Auto Loans

 

But sure, auto sales should be perfectly sustainable around 18mm per year...

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Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Mar 3, 2017 8:04 PM

Hmmmm... reminds of another by state distribution.

Luckhasit's picture

They are only 14% of population you dumb shithead. 

Dane Bramage's picture

Oregon has the lowest delinquency %?  :-/

vega74's picture

I noticed that too.  Higher lending standards?  More purchases paid with cash (ganja money)?

Stuck on Zero's picture

Every illegal alien in America should rush out to buy a fully tricked out F350 with zero down. Then drive it to Mexico where they're built and get a job at a Ford factory. Jobs for everyone.

alphamentalist's picture

i have family in a classic marijuana town in oregon. so i visit there every year or so. for YEARS running, every visit would find the place shittier and shittier. more boarded up stores, more odd uses of commercial space, more vacant homes, etc. then, early last summer, suddenly the place was booming. new retail, new commercial, new industrial spaces, all occupied by prosperous looking businesses. it was like the recession NEVER happened (and this was one of the national ground zeros for the bubble and the collapse). thought i to myself, "wtf, have i been imaging the malaise, or is this just a late-bubble blow off like last time?" so i ask around. everyone says it's the marijuana money. back in the day, all that cash would get siphoned away to the cartels. now it had to pass through the local economy at least once--as it can not be directly deposited in a federal bank. so every grower/dispenser has to launder their cash, and the prefer method is to hire a builder and pay cash for a building that can later be sold for clean cash. i dug down a layer or two and the per capita flows are equivalent to peak QE for the surrounding zip codes--except it is not stuck purely in financial assets. it is the most shocking "stimulus" i've ever seen. eventually--assuming a continued trend of legalization--pot will commoditize and there will be no profits to wash through oregon real estate. but for now, it is potent. 

jbvtme's picture

alpha...excellent commentary

prime american's picture
prime american (not verified) jbvtme Mar 4, 2017 3:48 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

algol_dog's picture

Would that be Cave Junction? 

AR15AU's picture

yep... and our actual number one industry of timber may be boarded up so to speak but the timber keeps growing and as the trees get denser they literally add commercial value every year. so we have a truly renewable natural resource that we could use again at any time the political will appears that oil or mines just can't match. 

Unholy Dalliance's picture

Wait, what? They pay cold, hard cash for construction work? How? Who are these builders? Surely not country-wide construction co.s? Ah, I see, the builders are local construction workers - let go from construction co.s with skills and enthusiasm still there in abundance! They work for cash because they then pay less tax (or no tax, perhaps) and everyone is happy - except the fed. government!

This is how it should be - in a just and fair 'society' as America was in its first decade after 1776 until politicians squabbling and the British harrying spoilt the party. And, at that time, only gold and silver could be tendered as 'money'. But, you see, it is possible to return a local economy to something approaching the Golden Age of a the early years of the American Republic. It will be slow and, sometimes, painful and the harrying by the 'British' in Wash. D.C. (which is not part of the Republic) will continue until there is some sort of 'challenge' to their 'power', and I don't know what form that challenge will take, but there will be one, setting everyone in America on a different path: one where fairness, honesty and justice are not dirty words but actual Principles by which individuals, families, communities, hamlets, villages, towns, counties, states and even, God forfend, even the government, conduct their private and public affairs (business, to you!)

Wake up, Americans, and take back YOUR country!

TGDavis's picture

Alpha, what caused the change in regard to the cartels?

flemsnopes's picture

Only on ZH can you get this kind of non-fake economic analysis!  I'm guessing they also buy cars for cash and then resell for "clean" cash which can then be deposited in a bank account. American ingenuity!

DPLETTENBERG's picture

If you think about it why give it (the cash) back to the bank. It seems to me a bank free economy might work better then a cash free one.

post turtle saver's picture

watch the fun really begin when the builders set up a credit union

HSBC was founded by pirates, just sayin'

East Indian's picture

HSBC was founded by pirates

 

and still run by.

Semi-employed White Guy's picture

i have family in a classic marijuana town in oregon

 

I never heard anyone describe a town as a marijuana town before let alone a classic one.   I must be behind the times.

The Shadow Broker's picture

Very intelligent observations sir.

Semi-employed White Guy's picture

But that's still more sustainable than what the Fed is doing!

fishwharf's picture

Let's hear it for the Oregon State Beavers.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Luckhasit Mar 3, 2017 8:10 PM

14% of the population are Bernie voters?

swmnguy's picture

So you're arguing the Bernie voters are the most prudent and reliable auto loan borrowers?  That's probably true, but not the usual line of smear one sees 'round these parts.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) swmnguy Mar 4, 2017 12:29 AM

No, I am trolling LuckHasIt's predisposition to jump to that conclusion.
Also, the max end of that spectrum is 1.53%.
Maybe it's like tipping.  Drive a car you fucking can't afford, and tip your server nothing.
There are many kinds of "rich". 

any_mouse's picture

14% nationally. The data is state by state.

Look who is dumb now.

Bigly's picture

I was thinking the exact same thing!!!!

 

Silver Savior's picture

Funny thing is with all this crazy lending I still do not want to replace my 1995 Honda Accord with over 200k miles on it even if I can not open the drivers door from the outside. Fuck material things besides silver and gold!

Bigly's picture

If people like you because of your car...or vice versa...get new friends. 

The great thing about getting older is one should no longer care about unimportant crap.  Cars fall into this category.

It is unbelievable who is driving these more expensive cars. The smart people are blending in with non descript cars.  That is the smart move.  Just make sure it is dependable 

Jon Bong Jovi's picture

The smart guys section 179 their luxury vehicles, too bad you can't fully deduct the price of the car anymore though. I just lease them now since they added the stupid cap.

YourAverageJoe's picture

I like driving my 15 year old Sierra buy I also like my wife to be in a newer car.

Happy wife, happy life.

BlindMonkey's picture

I'm glad to see you uber smart family geezers out of the pussy banging business.

 

 

BTW, what are the month-lies on a new 911???

Bigly's picture

If you have to ask...

 

Sorry :-)

 

Btw, i think you would be shocked to see how much i do not look like I probably do in your mind.

Not everyone is a 23 year old twit.

Four chan's picture

i want a 911 turbo, after the crash.

Skeero's picture

Fucking agree heavily. I've fallen in love with the 930's the last 2 years, but not worth the price. The new ones don't have a clutch pedal so not getting one of those. I can't even find a decent priced shell. I don't even want the Porsche motor. Just the body.

Slingsby's picture

Change the oil on that bitch and make sure the trans fluid and timing belt are taken care of and it will last twice that.

Best car I ever owned, 1998 Nissan Maxima. Bought it new and it ran on rails until the alternator went at 170k. Starter kicked at 220. All my other repairs were wear items. I drove that car like a badge of honor.

I sold it in 2015 and hope it's out there somewhere making someone else as happy as it did me. Original engine and tranny. 300k. Other than dogs I've,owned, maybe the best money I've ever spent.

American Psycho's picture

I'm currently crusiing around in my 96 Maxima around 220k miles.  The misses refers to it as "the Golden Nugget" despte the fact the GA sun is destrying the paint.  Only major repairs were the timing chain, water pump, and starter.  Not too bad if you consider I bought it for 2k 5 years ago and insurance is less than 30 / month. 

Uchtdorf's picture

Was your airbag recalled? If so, please, get it replaced.

RichardParker's picture

Keep the ,'95. The new accords are decent cars and cheaper in real dollars but they have been decontented in terms of quality.

I had a '99 and drive a 2012.

LetThemEatRand's picture

Wasn't Linda Lovelace in Deep Subprime?  

YourAverageJoe's picture

You said a mouthful right there...

Offthebeach's picture

Nothing a little Ivory soap behind a green door wouldn't take care of. 

au_bayitch's picture

That was Marilyn Chambers

Skeero's picture

I wonder how many of the subprimes are bmw's. I'd be more interested in seeing that info. People buying stuff that they can't afford. Lexus, BMW, Audi, etc. Especially those that aren't leasing the cars lol

What's the best way to profit off of this? Long part stores? And short auto manufacturers?

Also would need to fire the idiots at part stores. You should be required to know about cars to work there.

0hedgehog's picture

My guess is it's the exact opposite...fat cats keeping their $hit and Joe average watching it all run away and nothing they can do to stop it.

83_vf_1100_c's picture

I gave up on local McAutoParts unlezs it is an emergency. Avg 200% price point compared to Rockauto.com. High school part timers with no grease unddr their nails who don't know a spark plug from a fuel injector. Things that can be planned for get ordered and surprises usually mean we get by with one car for a few days. RA is usually way cheaper and offers 5 manufacturers/grades of quality. Fucking eBay is cheaper than the local boys.

To the Nissan guys above, if yours has the 2.5 or 3.5 loctite blue the throttle plate screws and ditch the precat for a header tube replacement. The pre cat is notorious for crumbling honeycomb and byebye cylinder walls. Replace the shitty brake rotors with aftermarket to get rid of the shimmies. New rear coil springs to get rid of the common saggy ass syndrome.  Door handles that break frequently. Lots of problems frankly but cheap and easy fixes and 300k miles is easy to get.

jamesmmu's picture

Tell me something that can stop rate hike between now and 15th?