Signs Of The Peak: These 10 Charts Reveal An Auto Bubble On The Brink

U.S. auto sales have hovered well north of replacement rates for several years now on the back of an improving labor environment and more importantly an extremely accommodating financing market characterized by $0 down, 0% interest loans to subprime borrowers, with perpetually longer maturities to help manage monthly payments...because if your monthly payment is $500 you can afford it, right?

But, according to data presented in Experian's Q3 2017 auto financing market update slides, the auto market may finally be on the brink of running right off the other side of Ford's proverbial "Plateau."

First, as we've warned numerous times, inflated auto sales continue to come solely from an unprecedented expansion in consumer credit... expansion which has thrived by targeting lower and lower credit quality borrowers.

Of course, with auto OEM's now fully dependent on further penetration of the 'Deep Subprime' and 'Subprime' borrower universe as a source of their marginal buyer of last resort, it's only logical that the term structure of auto loans on the lower end of the credit spectrum would continue to get stretched with Experian noting that 85+ month loans have now become the norm. 

Meanwhile, the continued deterioration in credit quality comes despite elevated delinquencies all across the country.

But the key data which seems to suggest that the auto bubble may have run its course comes from the following charts which reveal that traditional banks and finance companies are starting to aggressively slash their share of new auto originations while OEM captives are being forced to pick up the slack in an effort to keep their ponzi schemes going just a little longer...

But we're sure all this is just a natural result of healthy competition between lenders and has absolutely nothing to do with banks getting nervous about that coming flood of lease returns...

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