Will We Never Learn? Subprime Auto Loans Accelerating (Again)

It is remarkable that we greedy ignorant short-term-focused human beings never seem to learn that driving forward and looking in the rear-view mirror can only end in disaster. Forget 'dancing while the music plays' or other such 'defenses' of herd ignorance, the most recent data regarding Auto Loans is simply mind-blowing:

  • Subprime borrowers received 56.46 percent of loans on used cars in the quarter, up from 52.70 percent a year earlier.
  • The average loan-to-value on new cars was 109.55%
  • The average used car loan-to-value ratio rose to 126.62%
  • 77% of Subprime Auto Loans are for a period greater than five years

As Yahoo notes, citing some monkey, "Despite the rise in subprime loans overall, there is still a strong sense of managing risk. Because the overall lending environment has improved, lenders are making loans available to a wider range of customers."


Via S&P Auto Loan ABS report:

So not only are the auto manufacturers stuffing the dealer channels full of inventory (and choking off supply - a la Chevy Volt), they are so desperate once again to get consumers spending that they will give credit to anyone - with the defense that defaults HAVE BEEN low. I hope the reader can sense our incredulity that once again this complete and utter lack of understanding of the loan business cycle by supposedly intelligent individuals who are more than willing to offer credit (and on the other side - accept huge debts for short-term living standard improvements). </rant>


Perhaps not so surprising - sure enough - (h/t Andrew P) - Auto ABS are weakening already... As Santander and Honda's Auto ABS see annualized losses rising...