An increasing number of Americans have stopped paying their car loans, and Wall Street is starting to worry
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Fitch, Moody's, Morgan Stanley, Mizuho and Evercore ISI have all published research on the market in the past few days, and there's a recurring theme: It's not looking good. There could be wide-ranging consequences, with automakers, the economy, consumers and one corner of the bond market all potentially taking a hit.
The increased interest in the auto loan market seems to be based on commentary from Ally Financial, weak guidance from Ford, and what Evercore called "a splurge in incentive spending."
- The delinquency rate for subprime auto loans is at the highest level in at least seven years.
- Banks are pulling back, and newer players with looser lending standards are stepping in.
- Used vehicle prices are dropping sharply, as the market is flooded with off-lease vehicles.
- The percentage of trade-ins with negative equity is at an all-time high.
- Asset-backed securities based on auto loans are showing signs of stress.
- A growing proportion of the auto loan ABS market is now made up of "deep subprime" deals.
To the charts:
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