The latest canary in the coal mine is surging auto loan delinquencies. The upturn in the auto industry cannot withstand a credit retrenchment. From Wolf Richter at wolfstreet.com:
The New York Fed, in its Household Debt and Credit Report for the fourth quarter 2016, put it this way today: “Household debt increases substantially, approaching previous peak.” It jumped by $226 billion in the quarter, or 1.8%, to the glorious level of $12.58 trillion, “only $99 billion shy of its 2008 third quarter peak.”
Yes! Almost there! Keep at it! There’s nothing like loading up consumers with debt to make central bankers outright giddy.
Auto loan balances in 2016 surged at the fastest pace in the 18-year history of the data series, the report said, driven by the highest originations of loans ever. Alas, what the auto industry has been dreading is now happening: Delinquencies have begun to surge.
This chart – based on data from the Federal Reserve Board of Governors, which varies slightly from the New York Fed’s data – shows how rapidly auto loan balances have ballooned since the Great Recession. At $1.112 trillion (or $1.16 trillion according to the New York Fed), they’re now 35% higher than they’d been during the crazy peak of the prior bubble. Note that during the $93 billion increase in auto loan balances in 2016, new vehicle sales were essentially flat:
No way that this is an auto loan bubble. Not this time. It’s sustainable. Or at least containable when it’s not sustainable, or whatever. These ballooning loans have made the auto sales boom possible.
To continue reading: “Seriously Delinquent” Auto Loans Surge
something happened to the financial side of auto loans several years ago, did you notice how auto pricing in advertising went from” buy this car” to “lease this car”. all the advertising now is aimed at leasing cars. The simple point is that today no one can afford the price of new vehicles., the economy is just not that good. how many people can afford the payment of a thirty or forty thousand dollar vehicle if the advertising mentioned the actual price of the cars, no one would buy, but the cheaper monthly payment of leasing make obtaining the use of a vehicle possible. People no longer own the cars, all they do is rent them in the form of leasing. A fundamental change in vehicle ownership has occurred.