Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Technical Scoop - Weekend Update Apr 23
By: David Chapman

Silver Squeeze, Gold Fails, And GDX Breadth
By: Jordan Roy-Byrne CMT, MFTA

China Plays It Cool
By: John Mauldin

Inflation, With a Shelf Life
By: Gary Tanashian

A dramatic upward reversal in US monetary inflation
By: Steven Saville

WAITING FOR THE BUY SIGNAL: What’s Going On With Silver Investment
By: Steve St. Angelo

Gold Seeker Weekly Wrap-Up: Gold Dips on the Week While Silver Rises Almost 3%
By: Chris Mullen, Gold Seeker Report

Taiga Launches Website, Sets Tentative CSE Trading Date
By: Eagle Plains Resources Ltd.

Economics 101: Who Sets Prices?
By: Alasdair Macleod

Silver Breakout Or Fakeout?
By: Mike Maloney and David Morgan

 
Search

GoldSeek Web

 
Has the Subprime Auto Bubble Burst?


 -- Published: Thursday, 12 April 2018 | Print  | Disqus 

It looks like the subprime auto loan bubble has popped.

Last year, we reported that the auto industry’s check engine light was on. Now it looks like the thing is totally breaking down. Small subprime auto lenders are starting to go belly-up due to increasing losses and defaults. As ZeroHedgenoted, “we all know what comes next: the larger companies go bust, inciting real capitulation.”

Bloomberg recently reported that not only are subprime auto lenders facing tough business conditions, there are also allegations of fraud and under-reporting of losses.

Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim margins spur banks and private equity owners to cut off funding. Summit Financial Corp., a Plantation, Florida-based subprime car finance company, filed for bankruptcy late last month after lenders including Bank of America Corp. said it had misreported losses from soured loans. And a creditor to Spring Tree Lending, an Atlanta-based subprime auto lender, filed to force the company into bankruptcy last week, after a separate group of investors accused the company of fraud. Private equity-backed Pelican Auto Finance, which specialized in ‘deep subprime’ borrowers, finished winding down last month after seeing its profit margins shrink.”

We’ve heard this song and seen this dance before. As Bloomberg noted, the pain among small auto lenders “parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming.”

The common denominator here: rising interest rates. Easy money pumped up both the housing and auto loan bubble. When the Fed takes away the punchbowl, bubbles burst.

Chris Gillock works as an analyst for Colonnade Advisors, focusing on subprime auto investments. His description of the auto loan industry sounds a lot like mortgage lending back in the years leading up to the housing bust.

There’s been a lot of generosity and not a lot of discretion on the part of lenders and investors. There’s going to be more capitulation.”

Auto loans to subprime borrowers have hit delinquency rates not seen since 2010. The number of borrowers behind on payments has been increasing steadily since 2012. In the third quarter of 2017, nearly 10% of auto loans extended to consumers with a credit score of less than 620 were 90 days or more behind.

In another bad sign for the auto market, subprime borrowers have gone missing from auto showrooms. According to Bloomberg, rising interest rates and rapidly increasing vehicle prices are squeezing consumers with shaky credit and tight budgets out of the market. Even the most creditworthy consumers aren’t showing up to dealerships.

In the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9%, according to J.D. Power. The researcher’s data highlights what’s happening beneath the surface of a US auto market in its second year of decline after a historic run of gains. Automakers probably will report sales in March slowed to the most sluggish pace since Hurricane Harvey ravaged dealerships across the Texas Gulf Coast in August, according to Bloomberg’s survey of analyst estimates.”

Americans simply can’t afford to buy vehicles. ZeroHedge compiled a number of statistics that reveal just how unhealthy the automobile market in the US has become.

  • The average price for a new vehicle is at a record high $31,099.
  • The average price of a used car is a record high $19, 589.
  • The average monthly payment for new and used cars has hit a record high of $515 per month.
  • The average auto loan has hit a record high of 69 months.

Notice the theme here — record high.

ZeroHedge summed it all up.

Cheap credit leads to easy lending conditions, and record prices as everyone floods into the market with lenders hardly discriminating who they give money to.”

And then the bubble pops.

The collapse of the subprime auto industry probably won’t have the same impact on the economy as the housing crash did in 2008. The industry isn’t as big in terms of dollars. But what’s going on in the auto industry is indicative of broader trends in the US economy. It’s not the only bubble.

Reprinted from SchiffGold.com.

 


| Digg This Article
 -- Published: Thursday, 12 April 2018 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.