I wonder who could have predicted this. Oh Yeah. Me. I wrote Subprime Auto Nation in September 2012. The entire auto recovery storyline peddled to the masses over the last few years is a sham. It’s just another Federal Reserve easy money created subprime bubble. Ally Financial and the rest of the Wall Street criminal syndicate have doled out subprime auto loans to any high school dropout that can fog a mirror, quicker than Bill Clinton does interns. The entire scheme was to give the appearance of an economic recovery and not worry about the future losses. The taxpayer would pick those up. The falsity of the fantastic auto sales meme is proven by the fact that automaker profits have fallen and their stocks are lower than they were in 2010.
Now the chickens are coming home to roost. 1 out of 12 subprime borrowers have failed to make payments within the first nine months of taking the loan. I wonder how many will make all the payments over the 7 years of their loan?
WTF did highly educated finance professionals think would happen when you loaned Shaquesha Jackson, with a 630 credit score, $40,000 to buy a Cadillac Escalade? Did they think she would make the payments with her EBT card? Did the fact she had defaulted on prior loans convince them she had learned her lesson? There are $40,000 vehicles all over West Philly, parked in front of $25,000 hovels. Who in their right mind thought lending money to these people for a rapidly depreciating vehicle was a good idea? Only an Ivy League educated Princeton economist could think this would work. Or maybe they just wanted to keep the ponzi going long enough to exit the Federal Reserve and start making $300,000 per lunchtime speech about how he saved the world.
The delinquency rates on all car loans at 2.6% are already approaching 2008 levels. I might want to remind you the government and MSM have been telling you we are in the midst of a strong economic recovery. As 2015 erodes into a greater depression, these default rates will soar well past 2008-2009 levels. The coming shitstorm created by the easy money mal-investment over the last five years is going to be epic.
Even Mark Zandi Admits It: Auto Loan “Credit Quality Is Eroding Now, And Pretty Quickly”
Submitted by Tyler Durden on 01/09/2015 10:14 -0500
Just 2 days after President Obama reflected on his glorious ‘save’ of the US auto industry – forgetting to explain how so much of this ‘buying frenzy’ has been predicated on massive low-quality-borrower-based credit extensions – The Wall Street Journal bursts the bubble of ‘contained-ness’. Auto loan delinquency rates are surging to levels not seen since 2008 and stunningly, more than 8.4% of borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November. As even glass-half-full-status-quo-hugger Mark Zandi is forced to admit, “It’s clear that credit quality is eroding now, and pretty quickly.”
As The Wall Street Journal reports,
