Is There a Subprime Auto Loan Bubble Forming? Equifax Economists Respond.
As we look forward to Used Car Week in Las Vegas Nov. 10-14, we anticipate many conversations to take shape around claims of a bubble forming in subprime auto loans. Our #subprime experts will surely be engaging in the conversations around the current state of subprime auto loans. And we’ll rely on the facts and data of today’s market.
Equifax has leveraged a wealth of market data to develop an analysis on the real landscape of subprime auto lending. Our Chief Economist Amy Crews Cutts and Deputy Chief Economist Dennis Carlson have developed “Not Yesterday’s Subprime Auto Loan,” an Economic Trends Commentary.
In the wake of the Great Recession, a “second-chance” market remains necessary to keep the economy afloat. Albeit, these second chances must depend upon adjusted lending practices to negate the risks of a burdened economy. The simple fact is that many rely on transportation to seek, obtain and maintain employment. A large portion of auto loan delinquencies that resulted during and after the Great Recession were coupled with other financial hardships. These risks may no longer be present, and therefore, overall risk may be reduced today.
In order for borrowers whose credit declined from such hardships to improve their credit, they must obtain mainstream loans. Auto financing in the subprime segments presents credit-building opportunities for subprime-score borrowers that in turn have the eventual chance to join the prime lending ranks. Within a well-regulated market with fairly underwritten loans and rates, subprime lending has its place. Subprime lending is not synonymous with predatory lending, as is an often-made association.
In “Not Yesterday’s Subprime Auto Loan,” our economists dive into the data to provide commentary on the following:
- Examination of 210 million consumers in the Equifax credit repository
- Comparison of three critical components of the mortgage market financial bubble to today’s subprime auto lending
- Illustration of the subprime share of today’s auto loan originations
- Analysis of historical performance, credit risk and distribution of subprime auto loan originations
Join in the #subprime conversation during Used Car Week and download our economic trends commentary by filling in the form below:
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