Auto-Loan Subprime Blows Up Lehman-Moment-Like
by Wolf Richter
WolfStreet.com
Nov 14, 2017
Given Americans’ ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. If the word “surged” appears a lot, it’s because that’s the kind of debt environment we now have:
Mortgage debt surged 4.2% year-over-year, to $9.19 trillion, still shy of the all-time record of $10 trillion in 2008 before it all collapsed.
Student loans surged by 6.25% year-over-year to a record of $1.36 trillion.
Credit card debt surged 8% to $810 billion.
“Other” surged 5.4% to $390 billion.
And auto loans surged 6.1% to a record $1.21 trillion.
And given how the US economy depends on consumer borrowing for life support, that’s all good.
However, there are some big ugly flies in that ointment: Delinquencies – not everywhere, but in credit cards, and particularly in subprime auto loans, where serious delinquencies have reached Lehman Moment proportions.
Of the $1.2 trillion in auto loans outstanding, $282 billion (24%) were granted to borrowers with a subprime credit score (below 620).
The Rest…HERE
