Auto-Loan Subprime Blows Up Lehman-Moment-Like

Wednesday, November 15, 2017
By Paul Martin

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

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