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Car loan industry may suffer the next debt crash

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Car loan industry may suffer the next debt crash


The Wall Street Journal recently reported on some staggering statistics from the Federal Reserve Bank of New York that show how the auto financing industry may be the victim of the next debt crash because of increased delinquencies.

According to the WSJ:

Figures released by the NY Fed show 6 million auto borrowers with poor credit scores are at least 90 days late on making their loan payments. Specifically, the interest rate on 90-plus day late loans made by auto finance companies has increased by a full percentage point over the past four quarters. Auto finance companies are the source of the vast majority of subprime loans. The percentage of delinquent subprime auto loans has raced to the highest level since 2010.
-Wall Street Journal

According to figures from 3 years ago, there were 260 million registered passenger vehicles in the United States. Lending for cars and truck in the U.S. has increased sharply over the past few years. In fact close to $120 billion dollars in auto loans were crated in the spring of 2016 which now means Americans’ car loan debt has surpassed $1 trillion dollars.

The other big news story regarding the auto industry, President Elect Donald Trump has threatened to slap a 35% tariff on Ford, if the automaker goes ahead as planned with a move from the U.S. to Mexico of production of small-cars over the next 2 years. Ford says the move to Mexico won’t result in any U.S. job losses. Ford already employs 8,800 employees in Mexico. Ford employs 85,000 people in the United States.

See what Ford Motor Co. CEO Mark Fields had to say to CNN’s Maggie Lake about the impact on the auto industry if President-elect Trump follows through on his threats to impose a 35% tariff on Ford. Watch video below.

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