According to NY FED over 7 million people are already 90 days or more delinquent on their car loans, the fastest acceleration being borrowers with the lowest credit scores- no big surprise there, they are already struggling to pay on time.
Around 8% of loans originated by lower-score buyers with a credit score below 620 were categorized as seriously late, “a development that is surprising during a strong economy and labor market,” Fed researchers wrote.
Remember I talked about how the auto loan industry had become more predatory with its loan structuring and showed how most of the new car dealerships make more money off the loans then selling the cars? Well here is that data again as a refresher.
Auto loans have now been packaged up into bonds, and wall st is eating it up!
According to Edmund’s car shopping website, the average price of a 10-year-old vehicle is $8,657, still 75% higher than in 2010 despite a overall softer market. New cars have seen a price increase of just 25% during that same time, so not even the guy who gets repo’d and is really down and out will get a brake on buying used. Not only will he pay more, there are all the normal wear and tear question marks one has when dealing with a car that age.
Meanwhile even though they said the price of new cars has gone up just 25%, that adds up quick, especially if we talk about how most of the times the base model is lucky enough to come with a radio in US autos. That’s a joke, I know they come with radios but there is a huge difference between today’s base model and what that meant just a few years ago, you are getting less and paying more.
“Prices are crazy on cars nowadays — all of them,” said Loehr, who sells Jeeps, Rams and other Fiat Chrysler models from a showroom northwest of Atlanta and has been in the business for 35 years. “They’re crazy to me, and I do it every single day, all day long,” New Jeep Gladiators, the truck version of the Wrangler model can easily fetch $50,000, which in a time when there is a “climate crisis” trucks are at all time high prices. Even with manufactures stretching out payment terms to new highs (65% of auto loans are 61-72 months now) car prices and monthly payments still keep going up!
Here is how some of the popular models performed from the big 3 in Q3
- Auto loan interest rates dipped in September to 5.7%, the lowest this year, and the average term approached 70 months, according to market researcher Edmunds
- Monthly payments rose from a year ago as the average transaction price on a new car exceeded $37,000 — a 14% jump from 2014
So lets summarize here…
- New car prices have gone up!
- Used car prices have gone up!
- The average commute time is now 27 minutes- a new record high
- 4.3 million workers commute 90 minutes or more now
We should see the rest of 2019 holding together but if we continue on this path by as soon as Q1 2020 the wheels will start falling off the US economy and Global economy will follow sui