Signs Of The Peak: 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 $515 you should be able to afford it.

But, according to data presented in Experian's Q4 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...

...even if in the 4th quarter there was a modest slowdown in deep subprime loan issuance.

Composition aside, Experian found that the average new vehicle loan hit a record high $31,099, while the average loan for a used auto climbed to a record of $19,589.

"I think we're certainly at a point where affordability is a question," said Melinda Zabritski, Experian's senior director of automotive finance solutions. "When you look at how much income you need to support that payment, it certainly is higher than your average individual income."

With auto loans hitting record highs, the average monthly payment for a new vehicle hit an all-time high of $515...

... while the average used auto loan payment also hit a record $371 per month.

And with auto OEM still largely reliant on further penetration of the 'Deep Subprime' and 'Subprime' borrower universe as a source of their marginal buyer of last resort - a sweet spot where OEMs are finally feeling some resistance - it's only logical that the term structure of auto loans on the lower end of the credit spectrum would continue to get stretched.  On average, Americans are extending a new car loans over 69 months, while the average used vehicle loan has a term of just over 64 months. Needless to say, both are record high for yet another quarter.

Consumers are stretching out both the size and duration of loans because prices paid for new vehicles has climbed more than 10% over the last five years. In 2017 the average price paid for a new vehicle was an all-time high of $35,176, according to That price is up from $33,532 in 2015 and $31,773 in 2013.

And while one reason people are spending more is because they are buying more trucks and SUVs, which are sold at higher price points, a far more important factor, especially in the last year, is the rise in interest rates.

"For some buyers, this is going to come as a surprise," said Jessica Caldwell, executive director of Industry Analysis for "For buyers with average credit scores, the rates are higher than a couple years ago and that will mean a higher monthly payment."

In February, the average interest rate for new financed vehicles was 5.2 percent, up from 4.9 percent a year ago and 4.4 percent five years ago. As Experian shows, there has been a rise in rates across the entire loan market, with average loan rates charged ranging from 5.11% at the end of Q4 for all new cars, to 8.84% for used cars, all the way to 11.48% for independent used cars: these have increase by 37bps, 30bps and 11 bps Y/Y respectively.

As Edmunds Jessica Caldwell ominously concluded, "We're starting to see a trickle-down effect from the rate increases happening at the federal level."

Meanwhile, as monthly payments keep rising to the point of unaffordability, delinquencies continue to grow 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.

And while some can claim that this is just a natural result of healthy competition between lenders, what is likely causing sleepless nights at banks who have tens of billions in outstanding loans, is the coming tsunami of lease returns which will lead to a shock repricing for both car prices and existing LTVs once the millions in new cars come back to dealer lots...

Auto Leases


itstippy Lt. Frank Drebin Mon, 03/05/2018 - 19:33 Permalink

Who's buying them?  Farmers, ranchers, landscapers, scrap steel dealers, that sort of people.  Guys who have heavy loads of seed corn, concrete blocks, sod, or derelict machine parts to haul and need a shit ton of horsepower and payload capacity to get the job done.  Fuel economy and handling charateristics aren't important when you need to haul 2K lbs. of crap from point A to point B to put food on the family table.  Load leveling suspension is a huge plus when you're hauling massive off-center loads like industrial boilers or nuclear reactor control rods.

Don't you watch the TV ads for these rigs?  They're aimed at hard-hat-wearing manly men with serious work to do and need a truck that works as hard as they do. 

There are tens of millions of guys like this in the U.S., judging by full size truck sales.

In reply to by Lt. Frank Drebin

3-fingered_chemist Lt. Frank Drebin Mon, 03/05/2018 - 19:51 Permalink

Seems to me there is a business opportunity here for trucks given that their price is completely disconnected from reality.

Repair shops should be advertising complete overhauls.

Let's say you have a 2008 Ford, Chevy, or Dodge. This company only does overhauls as their main business which would include a few options.

1) Remanufactured drivetrain (engine, tranny, and suspension-with warranty on engine and tranny)

2) Remanufactured drivetrain and new upholstery

3) Remanufactured drivetrain, new upholstery, and paint job

Obviously there could be an a la carte menu as well.

Nonetheless, how much would it cost to do any of these relative to 70k for a new truck? 

Maybe 10-15k? Get a bank to offer financing at 0 % for 36/48 months for qualified customers.

I'd assume this would be pretty enticing for companies like construction, landscaping, etc. where they just beat the shit out of the truck anyway.

In reply to by Lt. Frank Drebin

karenm Mon, 03/05/2018 - 18:16 Permalink

Here's a sign. I have friends in the industry who all tell me that Ford is now buying cars/trucks back from dealers because...they have to, but that's not all.


They're re-selling them to other dealers and booking the sale twice. So I guess that's what the whole channel stuffing plan was about. They knew they'd end up buying vehicles back due to dealers screaming, but even then they had a plan to extend the BS narrative a bit longer.

So you have to ask yourself, why the extreme desperation to extend this out to the very last second? Why not just trigger a recession and do the usual plan? 

Because folks, this time it won't be the usual end. 



kralizec karenm Mon, 03/05/2018 - 18:20 Permalink

That is only twice if they fail to record the repurchase...which I doubt, but where they are likely making a profit is on the spread...I bet they are buying at a discount to wholesale and reselling at basically they are effing their dealers.  Not for the first (or last) time!

In reply to by karenm

karenm 1981XLS Mon, 03/05/2018 - 18:40 Permalink

Hey 1981XLS!

So, a real live psyop shill. 

Bit sloppy, no wonder you're assigned to trolling forums. You have yet to learn the fine art of subtly, but with your IQ, I doubt that will ever happen. Your masters know this, and soon as it hits the fan you'll be one of the first to catch a 6 inch knife in the back, cause the NWO has no need of dumbfucks like you. 



In reply to by 1981XLS

Oldwood karenm Mon, 03/05/2018 - 19:39 Permalink

So what ever happened to those end of times photos of seemingly endless lots of cars, many supposedly lease returns with no place to go? I thought that was going to be calamity for used car prices, falling into the basement, translating into major losses for leasing companies who overestimated the residuals to keep monthlys low.

And so now, ANOTHER auto sales disaster coming our way?

I'm as pessimistic as anyone, but even I am starting to tire of this endless doom that never quite seems to come to pass.

I guess REAL news just doesn't sell anymore.

In reply to by karenm

1 Alabama Oldwood Mon, 03/05/2018 - 20:03 Permalink

They already said that the used car ave price loan was @ $19,000, so the cars are stacked up at used dealer lots paid for but still there to make a killing if you can afford to be "financially killed", and that's after the heath care tax man, and mortgage/(rent) tax man, and energy tax man, and the food tax man, get their cut first. Dont wait, question authority now!

In reply to by Oldwood

USofAzzDownWeGo Mon, 03/05/2018 - 18:28 Permalink

KMX, my favorite short, has 13 billion in debt, 30 million in cash, has been porking earnings and share price the last 10 years with stock buybacks as the insiders sell out. Higher yields are going to put that company under. The bond market, or market, has caught on to KMX and that's why it mimicks TLT in trading. Look how weak it's been lately. 

Let it Go Mon, 03/05/2018 - 18:43 Permalink

Agreed, we have seen the peak. The road ahead looks very challenging for automakers with problems building and lurking around every corner. The combination of overcapacity coupled with high consumer debt and higher interest rates paint an ugly picture going forward. When you add in the fact millions of vehicles are coming off leases the challenge facing automakers becomes formidable.

Delinquencies on subprime loans made by non-bank lenders are soaring toward crisis levels just as some of the big banks long friendly to this sector have pulled back from the auto lending business. To top it off, state regulators are circling the industry and looking at whether it preyed on borrowers and put them in cars they couldn’t afford. More on the problems automakers face in the article below.

 http://Automakers Face Ugly And Bumpy Road Full Of Potholes.html

red1chief Mon, 03/05/2018 - 19:26 Permalink

"In 2017 the average price paid for a new vehicle was an all-time high of $35,176"


Why do all these scare articles only state average? More relevant is the median. What is the median car cost versus the median income? Try Googling that and you can't even find it.  Average includes the $100k + cars bought by the 1%, which is far from the typical American and will skew the average number high.


People can buy a decently equipped dependable and comfortable new car in the low 20's.

Swamidon Mon, 03/05/2018 - 19:33 Permalink

I went for one of those loans and it's a race to see if the Ford holds together long enough to see the loan paid off.  Never again.  Will buy my next new truck with Gold or Silver, and not much of either. 

BetterRalph Mon, 03/05/2018 - 22:15 Permalink

I like new car air conditioners, and speakers and amplifiers, but I hate new car computers, gps, iot, and anything past eight wires connected to the motor.   each extraneous retarded system a potential for failure or effiency loss, I hate the thin-ness of new cars too, the paint jobs suck also, I hate the cheap-ness compared to a 1972 anything.

Pleiku Tue, 03/06/2018 - 12:05 Permalink

  Worked for Dodge building trucks '97 - '08.  When the germans bought us they changed things for the worse.  They overbuilt. 60 hour weeks for years and the workers ALL knew we were gonna run into problems and then the economic downturn caused a double whammy. Management there was like D.C.. Idiots.  No sense of quality commitment by the honchos.  Build as a many as you can or we can get another Plant Manager. I liked that Ford didn't ask for our (gov.) bailout.