Surprise! Surprise! American Car Payment Delinquencies Set Record

Former Fed Chairs, Janet Yellen and Ben Bernanke took great credit for steering the world recovery from the great recession. When something good happens, it’s a result of their masterful strategic planning. Why are they totally surprised when negative news gets reported?

The Business Insider headline blared, “A record 7 million Americans have stopped paying their car loans, and even economists are surprised.”

Wolf Street headline, “Subprime Arrives: Auto-Loan Delinquencies Spike to Great Recession Levels”:

“A development that is surprising during a strong economy and labor market”: New York Fed.

The Fed drives interest rates to historic lows, borrowing hits all-time highs and they’re surprised when auto loan delinquencies set new records?

Do their economists really wear those beanie hats with the propellers? At what point do these Ph.D.’s lose their common sense? I’m serious! It doesn’t take a genius to understand cause and effect. Don’t they look at their own published data?

The New York Fed’s recent “Quarterly report on Household Debt and Credit” indicates that Americans have taken on record amounts of debt; student and auto loans are growing rapidly:

Total Debt Balance and its Composition

Liberty Street Economics analyzes the details concerning the auto loan delinquencies (with my emphasis):

“2018’s strength in auto loans was primarily driven by those originated by the most creditworthy individuals…. The high volume of prime originations has caused a quality-shift in the outstanding pool of auto loans and,…. 30 percent of the $1.27 trillion in outstanding debt was originated to borrowers with credit scores over 760.

…. The share of total auto loans outstanding that was originated to subprime borrowers fell to 22 percent.These percentages would suggest that the overall auto loan stock is the highest quality that we have observed since our data began in 2000. However, with growth in auto loan participation, there are now more subprime auto loan borrowers than ever, and thus a larger group of borrowers at high risk of delinquency.”

Who are these struggling borrowers?

Auto Loan Delinquency By Credit Score Chart

“The increase in delinquency is most obvious among the loans of the two groups of lower-score borrowers…. Borrowers with credit scores less than 620 (increased)…. Meanwhile, the delinquency transitions among those with the highest credit scores have remained stable and very low.”

1 2 3 4
View single page >> |

For more detailed information on how to get the job done, you can download my FREE report: 10 Easy Steps To The Ultimate Worry-Free Retirement Plan – by clicking  more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.