I didn’t want to write a whole long article about whats going on with auto sales and auto loans but there is so many visuals to share and it really is interesting and kinda tragic what is happening. This like the inverted yield curve is another 2020 recession indicator. It seems things went from still hanging in there in Q1, Q2 to the floor falling out here in Q3 with much of the extra juice in the lemon now gone, I think its gonna take a one or more BIG deals to pull us out of this or we will see that 2020 recession everyone is calling for.
Auto Sales Down
Deliveries of cars and light trucks may have slumped in September by about 12%, the average of six analysts’ estimates. Nissan Motor Co. is expected to lead declines among the major companies reporting Tuesday, Ford and GM reporting coming on Wednesday.
First off the United Auto Workers strike against GM, is now in its fourth week and is continuing to have a ripple effect on GMs operations outside of the US. GM just last week announced was “temporarily” laying off 6,000 workers, another 415 in Mexico and another 10,000 non-UAW workers. The Buckingham Research Group estimates GM has lost about 153,000 units of production over the first three weeks of the strikes.
Next we have the hometown hero Subaru finally ending its US sales streak after almost 8-years! Fun fact, the #1 Subaru dealer in the US is in Colorado Springs, at least it was up until Q1 of 2019.
Toyota Motor Corp. saw it sales plunge 16% in September, with both its namesake and Lexus luxury brands being affected. Deliveries fell for almost every model, including its best-selling RAV4 sports utility vehicle and Camry sedan.
While all carmakers are going to struggle with September having been a shorter sales month, the Labor Day holiday weekend applied to August figures this year, Toyota can’t entirely blame the calendar. Even on a daily selling rate basis, total sales were down 9.2%.
Hyundai Motor Co.’s namesake brand may have weathered the month better than others in the industry, with sales slipping 8.8%
Auto-Loans Have Become Predatory
It was only a matter of time before auto-loan debt was wrapped in a bond or debt vehicle and shuffled around from balance sheet to balance sheet like a game of ping pong and it looks like that is finally happening.
This will completely reshape this once fairly straight forward market, because its not just the Bond boom, auto loans are being stretched out longer and longer now.
- A Wall Street Journal report says that a third of all new-vehicle loans in the United States are longer than six years and concludes that “America’s middle class can’t afford its cars.”
- The paper also reported that only 18% of U.S. households can afford to pay cash for a new car.
- 7 Million people are at least 90 days behind on their payments
- 17 Million new cars purchased each year in the US
- Average loan for a new car was $32,119 during Q2 of 2019 (which, at 16% more than during the Q3 in 2014, is normal at standard 3% annual inflation rates)
- For a used car, it was $20,156, or only 9% more
- The Consumer Financial Protection Bureau estimated that 42% of all car loans made in 2017 were 72 months or longer
- Now, the average loan length for new cars is 69 months, and loans of 85 months or more represented 1.5% of all new-car loans
So the dealerships make more money off the car loans than the cars they sell, don’t be surprised when they push you over and over again to get a loan.
Next most people aren’t even paying down their cars enough before they trade them in for a new one. That is almost 35% are upside down at time of trade in for a new vehicle.
Its easy to see that just like with Student loans and other debt types that the banks are getting more and more creative with different ways they can wrap that up into baskets of debt to be pushed over the table from bank to bank. The interesting thing will be if there is a bailout again and the taxpayers pay like last time, will anyone call in and say they already paid off the bank and won’t be making payments anymore? After all, you just need to prove the bank doesn’t hold the original note, my guess is no.