One Chart Proves Auto SAAR Numbers Are Nothing More Than A Rigged, Debt-Fueled Farce

Earlier this morning the New York Federal Reserve released their quarterly consumer credit report which detailed, among other things, delinquencies rates on every type of consumer debt from mortgages to student loans.  

Now, given the 4.3% unemployment rate in the U.S. (forget the ~95 million people out of the labor force for a moment) and equity markets which reassure us that "everything is awesome" by surging to new highs each and every day, one would assume that delinquency rates on consumer credit would be somewhat subdued relative to recent history and certainly when compared to the 'great recession'.

And, for the most part, that assumption would be right but for auto loans which stands out as the only class of consumer credit that has consistently suffered from rising delinquencies going all the way back to 2014. Of course, this prompts the obvious question of why auto loans seem to be the outlier.

Luckily, the NY Fed breaks down auto loans into two categories to provide a little more granularity on what's happening here. 

First, taking a look at auto loans provided by traditional banks and credit unions, one can see some marginal deterioration in subprime auto loans.  That said, the deterioration is certainly nothing substantial with 90-day delinquencies pretty much in line with 2004/2005 levels and no where near the rates experienced in 2008/2009.

But, a drastically different picture emerges when looking at just the auto loans originated by America's auto finance captives.  To our great 'shock', auto OEMs in the U.S. seem to have been much more "flexible" on underwriting standards over the past couple of years resulting in delinquency rates that nearly rival those last experienced at the height of the great recession.

Of course, we're sure that GM Financial and Ford Motor Credit just got unlucky with their deteriorating credit portfolios...certainly they would never knowingly attempt to game their own short-term financial success by putting millions of Americans into cars they can't possibly afford, right?

Comments

Let it Go Nov 14, 2017 10:45 PM Permalink

With the markets sporting a glow from all-time record highs that are being made week after week it might be a good time to revisit the concept of irrational exuberance. We must consider the possibility we may be nearing the end of a 37-year run that will completely upend everything most people have come to believe about the economy. Since 2008 all growth has been built on a mountain of debt.Those of us who have doubted and repeatedly predicted the collapse of this so-called recovery remain wrong because we have underestimated both the breadth and size of the global intervention of central banks and governments. Nobody in their right mind would have ever anticipated the sheer magnitude and scope of what has become a worldwide phenomenon. The article below questions when the burden of global debt will cause Atlas to shrug. http:/When Will Atlas Shrug Off Burden Of Global Debtl.html

3-fingered_chemist Nov 14, 2017 9:35 PM Permalink

The financial arms of the autos don't care if the person driving the car defaults the moment they leave the lot. Do the autos even keep those loans on their books? I imagine if there is a way to package  and sell it, it's done the moment the ink dries.

peippe Nov 14, 2017 8:58 PM Permalink

Obviously the smart, informed consumers like me are waiting for those Damn Jetson's Hovercars.Build them & I guarantee we will be in the showrooms.We don't want this 20th century  garbage. How many F150s, 'stangs & vettes & camaros can we stand?Sweet baby Jesus I want to HOVER!

adr Nov 14, 2017 8:57 PM Permalink

I remember seeing the actual numbers of registered new cars and it wasn't close to 17 million, unless three and a half million people decided to put a car in a garage and never get a plate for it. I think the total overshoot for autos over the past five years is over 10 million cars. Ten million claimed to be sold that never actually existed. Kind of like birth/death jobs. Seasonal adjustments are bullshit to hide reality.