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Title: 6 million Americans have stopped paying their car loans, and it's becoming a 'significant concern'
Source:
Business Insider
URL Source: http://www.businessinsider.com/auto ... cy-numbers-from-ny-fed-2016-11
Published: Dec 1, 2016
Author: Matt Turner
Post Date: 2016-12-01 21:41:47 by U don't know me
Keywords: None
Views: 4272
Comments: 11
6 million Americans have stopped paying their car loans, and it's becoming a 'significant concern' Matt Turner Nov. 30, 2016, 11:00 AM There is a lot of talk out there about the auto-loan market right now. Hedge fund manager Jim Chanos has said the auto-lending market should "scare the heck out of everybody," while the auto-lending practices of some used-car dealerships has been given the John Oliver treatment on TV. It's a topic we've been paying attention to as well. In a presentation in September at the Barclays Financial Services Conference, Gordon Smith, the chief executive for consumer and community banking at JPMorgan, set out some eye-opening statistics on the market. Now the New York Federal Reserve is taking a closer look at the market. In a blog published Wednesday on the New York Fed's Liberty Street Economics site, researchers highlighted the deteriorating performance of subprime auto loans and set off the alarm. "The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years," the report said. To be clear, the overall delinquency rate for auto loans is pretty stable, and the majority are performing well. There are, however, signs of stress in the subprime market segment, which has seen rapid growth. Here are the key numbers from the report: The subprime delinquency rate for the trailing four quarter period moved to 2% in the third quarter. The only other time it was 2% or more was in the aftermath of the financial crisis. Subprime auto loan originations hit $31.3 billion in the third quarter, down from $33.6 billion in the second quarter. Bank and credit unions originated $9.5 billion in subprime auto loans in the period, a record high. Outstanding subprime auto loan balances now stand at $280.2 billion, a record high. For perspective, the pre-crisis high was $249.5 billion, in the fourth quarter of 2007. In other words, the subprime delinquency rate is creeping up, while the subprime market is ballooning in size. The Liberty Street Economics post, written by Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw, said: "The data suggest some notable deterioration in the performance of subprime auto loans. This translates into a large number of households, with roughly six million individuals at least ninety days late on their auto loan payments." This research has broader significance beyond the auto-loan market. We've previously reported at length on the worrying state of US consumer finances. According to UBS research, 65%, 36%, and 22% of lower-, middle-, and higher-income cohorts are "stressed." That means their income falls below or barely covers their expenses. And almost one in five stressed households, or 18%, agreed or strongly agreed with the likelihood of a default over the next year. When these stressed households were asked what debt they were most likely to default on, auto loans ranked third, behind credit cards and student debt. "Even though the balances of subprime loans are somewhat smaller on average, the increased level of distress associated with subprime loan delinquencies is of significant concern, and likely to have ongoing consequences for affected households," the Liberty Street Economics post said.
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#1. To: U don't know me (#0)
Here is what happened in America: an awful lot of Americans rolled earlier car loans out for longer payment periods while including trade-in residual balances. This practice has caused a lot of debt that is never paid but looks good on paper as the the extended loans cover the the balances. We can assume, some people get caught up in the practice of continuous monthly payments and give up, irrespective of their good credit; I understand that some people make monthly payments on autos that are actually HIGHER than their home mortgages or rentals. A bad situation in my opinion.
I grew up with the 36 month car loan WTF is the going length now? I haven't had a car payment in 30+ years. I buy affordable cars.
Fred - We are practical about life based on all the inputs of experience. As an example: I still drive my 2002 Jeep Cherokee with over 120K miles and my Lincoln 2012 MKS with 60K miles; my wife drives her 21012 Volkswagen that is to be paid off in 9 months. Some people just don't "get it" is all I can say.
What would they do with 5 million repos?
Sell them to the rich Mexicans in Mexico, proper.
I still drive a 1997 Ford Ranger with 496,000 miles and my Dads old 1976 Chevy pick up. They both run pretty good.
I do not go to church every time the doors are opened, but I love Jesus Christ. I am only human and fail Him daily. I believe Jesus is the Son of God, was born of a virgin, was crucified on a cross, died for my sins and rose from the dead and that He loves us dearly, and is faithful to forgive us of our sins. But He says that if you deny me in front of your friends I will deny you in front of my Father. Can I get an Amen!
I have a ranger with 263,000 miles on it.
Maybe I'll become a Repo Man as my retirement job. Steal from the poor for the rich man.
I wonder how many of them participated in Obama's Cash For Clunkers program where they got rid of a perfectly good, paid-off, older car to go into debt to buy a new one.
All your bubble base are belong to...
#2. To: buckeroo (#1)
#3. To: Fred Mertz (#2)
I haven't had a car payment in 30+ years. I buy affordable cars.
#4. To: U don't know me (#0)
#5. To: nolu chan (#4)
What would they do with 5 million repos?
#6. To: buckeroo (#3)
#7. To: U don't know me (#6)
I still drive a 1997 Ford Ranger with 496,000
#8. To: buckeroo (#1)
#9. To: U don't know me (#0)
"6 million Americans have stopped paying their car loans"
#10. To: Fred Mertz (#8)
Maybe I'll become a Repo Man as my retirement job.
#11. To: buckeroo (#1)
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