It needs to rise another 28 percent to match. I wonder if the cumulative dollar value of the auto loans is enough to make a macro difference in the banking industry.
My gut says no, but the dollars that typical
cars coat now is so high that it might.
Also, we so far have not seen a lot of weakness in the used car market. If these delinquent loans start showing up as repossessions we may see a fall in used car values which might be a self reinforcing spiral.
(Notice all the weasel words, I have no confidence in my analysis.)
Maybe it’s time for more personal bankruptcy “reform”? Make it even harder to shed debt? Haven’t had bankruptcy “reform” in about 20 years.
Referred to colloquially as the “New Bankruptcy Law”, the Act of Congress attempts to, among other things, make it more difficult for some consumers to file bankruptcy under Chapter 7; some of these consumers may instead utilize Chapter 13.
The 2005 act imposed a means test for all debtors with above average income for their state. Maybe the next “reform” will extend the means test to everyone, or define any bankruptcy filing, by someone with above average income, as “abusive” by default?
I am surprised how well used prices have held up. They keep claiming it will all crash but I don’t know. When I saw people with over 1000 a month payments for a new Car/Truck I was amazed. I don’t know where everyone is getting the money for that type of payment along with insurance.
I don’t know either. But if the prices of used cars start sliding it could (might maybe possibly) turn into deflationary spiral, or mini spiral. However with a trade war going on, I don’t know. The variables are too much for me.
Cheers
Qazulight (I did notice that Tesla is under a rolling 50.)
I have been watching used car price in this long running threat and discussed the impact on inflation measure. Certainly it will bring inflation numbers down, but will not lead to deflationary spiral.
Yeap, for more than 2 years I am expecting the prices will mean revert, so far it is not. We had few years of supply chain disruption and it is still normalizing. One of the major supply source to the used car market is “leased vehicles”. This source is almost dry, thus the supply is constrained, the demand is steady, and high cost of post COVID, all are contributing.
Yes. I have been expecting the lease returns to normalize in 2026 as the 2023 leases start to roll off. But if the delinquencies pile on in late 2025 we could get and over shoot. On the other hand cars built in 2021, 2022, and to some extent 2023 are likely to be found to have poor quality and be avoided.
