'Subprime credit losses are accelerating': There's a problem in the auto loan market
US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.
"Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years," said Michael Taiano, a director at Fitch.
We've written about this topic before. Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho's chief US economist. They jumped to 9.1% in January, up from 7.9% in January 2016.
Adam Jonas, Morgan Stanley's autos analyst, recently highlighted risks for Ford given the size of its auto financing business. And in November, the New York Fed's Liberty Street Economics blog looked at the deteriorating performance of subprime auto loans and set off the alarm.
Let's look at the charts from Fitch: