Auto Loan Market Gets Super Dark – Set to Unravel in 2017
Auto Loan Market Gets Super Dark – Set to Unravel in 2017
Car dealers across the U.S. have been stockpiling inventory based on latest sales, but evidence mounts they are hitting the wall with unsold cars, as creditworthy prospects retreat and the undesirables (FICO under 600) gather at the gate.
Consumers are taking out longer auto loans. Last year, almost a third of the auto loans were for a term of at least six years.
Also consider that almost 25% of car loans are subprime. Fitch Ratings reports the 60-day delinquency rate for subprime auto loans hit 9.1% in January, up from 7.9% a year earlier.
Elliiott Wave Financial Forecast says:
Car dealers proceed to permit buyers to “trade in underwater vehicles two or three times, something that is evidenced in the lengthening loan terms.
According to Moody’s, the average loan period for a fresh car has risen from sixty two months in two thousand sixteen to sixty eight months now. For subprime borrowers, the average loan term is now seventy two months. This is sometimes referred to as “extend and pretend” lending; it’s what happens at the tail end of a credit boom.Liberal auto financing may be headed into trouble next year and beyond as sub-prime borrowers fight with an average interest rate of Ten.4%, compared to a rate of about 3% for prime borrowers.
At an average fresh vehicle price of more than $33,000, subprime borrowers would pay almost $Ten,000 more in total interest, and have monthly payments more than $100 higher than prime borrowers, for a seven-year loan.
During the Good Recession several years ago, many people lost access to some of their credit. Since then, many people have accumulated more modest quantities of revolving debt.
Yet debt is still a problem. Non-revolving debt is accumulating twice as quick as revolving debt, and people are incapable to repay some of this debt.
Total consumer debt proceeds to increase, and non-revolving debt – which includes debt for vehicles and education – outpaced revolving debt, such as credit cards. In fact, during the past five years, vehicle and student loans grew by 42%, while revolving debt enhanced just 15%, according to an analysis of Federal Reserve debt data.
Edmunds.com projects a record-setting year, with 17.Two million fresh vehicle sales in 2016. But a report from Experian indicates that almost one-third of current auto loans are subprime.
Some of those loans will never be repaid, if a fresh report from credit rating company DBRS Inc. is correct. The company projects that 18% of last year’s subprime vehicle loans will go into default, higher than the 12-14% of loans that went into default in the past two years.
Freedom Financial Network found:
1.Non-revolving debt resumes to outpace revolving debt. In July (the most latest data available), total outstanding consumer credit rose by Five.8%, to a total projected $Three.661 trillion, excluding mortgage debt. Outstanding debt has hit a fresh high each of the past fifty six consecutive months. In July, the growth of non-revolving debt (debt for items such as vehicles and education, as well as unsecured installment loans) continued to outpace the growth of revolving debt (primarily credit cards). Non-revolving debt grew by 6.7%, while revolving debt enhanced half as quickly, by Trio.4%
Two. Private income resumes upward trend. In July (the most latest data available), private income enlargened for the fifth consecutive quarter, by $71.6 billion, or 0.4%. Disposable private income enlargened by 0.4%, or $60.1 billion, and individual spending enlargened by a modest 0.3%.
Three. Individual savings rate declines. In the 2nd quarter of 2016, consumers saved Five.7% of their individual disposable income. This rate is higher than rates in the spring, but it is lower than rates during the past three quarters.
Auto Loan Market Gets Super Dark – Set to Unravel in two thousand seventeen
Auto Loan Market Gets Super Dark – Set to Unravel in 2017
Car dealers across the U.S. have been stockpiling inventory based on latest sales, but evidence mounts they are hitting the wall with unsold cars, as creditworthy prospects retreat and the undesirables (FICO under 600) gather at the gate.
Consumers are taking out longer auto loans. Last year, almost a third of the auto loans were for a term of at least six years.
Also consider that almost 25% of car loans are subprime. Fitch Ratings reports the 60-day delinquency rate for subprime auto loans hit 9.1% in January, up from 7.9% a year earlier.
Elliiott Wave Financial Forecast says:
Car dealers proceed to permit buyers to “trade in underwater vehicles two or three times, something that is evidenced in the lengthening loan terms.
According to Moody’s, the average loan period for a fresh car has risen from sixty two months in two thousand sixteen to sixty eight months now. For subprime borrowers, the average loan term is now seventy two months. This is sometimes referred to as “extend and pretend” lending; it’s what happens at the tail end of a credit boom.Liberal auto financing may be headed into trouble next year and beyond as sub-prime borrowers fight with an average interest rate of Ten.4%, compared to a rate of about 3% for prime borrowers.
At an average fresh vehicle price of more than $33,000, subprime borrowers would pay almost $Ten,000 more in total interest, and have monthly payments more than $100 higher than prime borrowers, for a seven-year loan.
During the Superb Recession several years ago, many people lost access to some of their credit. Since then, many people have accumulated more modest quantities of revolving debt.
Yet debt is still a problem. Non-revolving debt is accumulating twice as rapid as revolving debt, and people are incapable to repay some of this debt.
Total consumer debt resumes to increase, and non-revolving debt – which includes debt for vehicles and education – outpaced revolving debt, such as credit cards. In fact, during the past five years, vehicle and student loans grew by 42%, while revolving debt enhanced just 15%, according to an analysis of Federal Reserve debt data.
Edmunds.com projects a record-setting year, with 17.Two million fresh vehicle sales in 2016. But a report from Experian indicates that almost one-third of current auto loans are subprime.
Some of those loans will never be repaid, if a fresh report from credit rating company DBRS Inc. is correct. The company projects that 18% of last year’s subprime vehicle loans will go into default, higher than the 12-14% of loans that went into default in the past two years.
Freedom Financial Network found:
1.Non-revolving debt proceeds to outpace revolving debt. In July (the most latest data available), total outstanding consumer credit rose by Five.8%, to a total projected $Three.661 trillion, excluding mortgage debt. Outstanding debt has hit a fresh high each of the past fifty six consecutive months. In July, the growth of non-revolving debt (debt for items such as vehicles and education, as well as unsecured installment loans) continued to outpace the growth of revolving debt (primarily credit cards). Non-revolving debt grew by 6.7%, while revolving debt enhanced half as quickly, by Trio.4%
Two. Private income proceeds upward trend. In July (the most latest data available), private income enlargened for the fifth consecutive quarter, by $71.6 billion, or 0.4%. Disposable individual income enlargened by 0.4%, or $60.1 billion, and individual spending enhanced by a modest 0.3%.
Three. Individual savings rate declines. In the 2nd quarter of 2016, consumers saved Five.7% of their private disposable income. This rate is higher than rates in the spring, but it is lower than rates during the past three quarters.