Delinquency on current consumer loans

I was listening to a ppiece on this morning’s news (ABC with commentary from Cox Automotive) about the higher rate of car loan defaults being generated by a combination of higher prices and higher interest rates.

OK, that makes a lot of sense, and increased consumer debt is a contributing factor to recessions, etc.

But being a cynic at heart, I did a bit of research and came up with the following data:

So maybe August’s data will be terrible, but compared to historical numbers, while the credit card trend is rotten not mentioned in the news piece), the car loan default rate appears to be about average and the news story seems to be serving someone’s interests.

It does, however, point to a useful data stream which should be watched as the underlying theory of increased defaults is plausible and if/when true, a canary in the coal mine.



Or, just typical SHOCKING!!ALARMING!!!SCARY!!! Shiny media hype, like everything else that gets big play?

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Car Prices Might Be Unsustainable for Buyers

Surging loan delinquencies signal that many consumers can’t afford their auto loans

By Ben Foldy, Wall Street Journal, Aug. 21, 2023

Five years ago, there were a dozen models of new cars that sold for less than $20,000. In 2023, there was only one: the spartan Mitsubishi Mirage hatchback, which accounted for about 5,300 of the 7.7 million new vehicles sold in the U.S. in the first half of the year.

If you are willing to spend more than $100,000, you can choose from 32 models. For the average American, paying off a new car at current prices demands 42 weeks of income, according to data from Cox Automotive, up from around 33 before the pandemic…

Higher interest rates have made the situation more difficult for buyers. Today’s average new car loan has a monthly payment north of $750, with an interest rate of 9.5%. For used cars, the average rate is above 13.7%, according to Cox. The average term for loans issued over the past three years is nearly six years, according to data from Experian

Seasonalized rates of severe delinquency for auto loans are the highest since at least 2006, but the jobs market is strong.

The squeeze faced by borrowers might soon ratchet tighter, with a payment holiday for student loans set to expire at the end of the month. According to credit-reporting agency TransUnion, more than a third of consumers with student loans took on new auto loans during the pandemic… [end quote]



I’ve been thinking about getting a new car lately, but after looking at prices I spent the weekend detailing my old ones.


The automakers who are escalating prices and profit margins, have plainly said they don’t care if they lose marginal customers who can’t or won’t, pay the escalated prices on oversize vehicles.

Volkswagen, the pioneer of the “people’s car” that epitomised the auto industry’s obsession with expansion, will axe dozens of combustion engine models by the end of the decade and sell fewer cars overall to concentrate on producing more profitable, premium vehicles.

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This comment in another article on VW pushing up-market cracked me up.

I’ve always said that Volkswagen thinks it’s more premium than it is, which is the exact reason why the Touareg failed in America – Volkswagen was charging premium prices for an SUV that had more hard plastic inside than your typical GM car.

RS kept telling us how it’s product was really worth the 40% price premium they charged vs the product at Best Buy or Circuit City. We know how that worked out.

Recently Ford CEO Farley said that, the company already having axed all it’s volume passenger car models, he now seeks to exit the two row SUV market, as there is "too much competition’ and Ford can’t charge prices as high as it wants.

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