Posted November 09, 2022
By Matt Insley
According to the Consumer Finance Protection Bureau (CFPB)...
“The average price consumers paid for new vehicles reached a record high of $48,182 in July of 2022 while the average price of used vehicles is $28,219, just below the record high set in April 2022.” (Emphasis ours)
“As seen in the graph below, prices for vehicles increased over the past two years, especially throughout 2021.”
Source: Cox Automotive Data Points, CFPB
The CFPB adds: “When looking at delinquency in the first two years after purchase, loans originated in 2021 and 2022 are starting to show higher delinquency rates relative to loans originated in previous years.
“For example, auto loans originated in 2021 have a delinquency rate… 13% higher than the delinquency rate of auto loans originated in 2018.”
Read on for more on this under-the-radar crisis…
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Your Rundown for Wednesday, November 9, 2022...
Consumers Are Walking Away…
“Now that the stimulus money has been spent and the extra unemployment benefits have expired, some consumers who overspent on a vehicle are struggling to keep up with payments, especially now that inflation makes everything else more expensive,” says ConsumerAffairs.
Of course, with inflation not seen since the Carter administration, this trend is even more noticeable among car buyers with subprime and deep subprime credit scores.
But that’s assuming credit scores were even checked. (Which is assuming a lot, apparently.)
Underwriting was incredibly shoddy during the free-wheeling early years of the pandemic when 96% of auto-loan consumers didn’t even have their income verified, per Consumer Reports.
And about those monthly CAR PAYMENTS?
“A typical $546 monthly payment on a used-car loan in March [rose] to $564 in October,” MarketWatch reports.
According to economist and former Fed insider Danielle DiMartino Booth: “People are walking away [from their cars] because payments are too high.
“You would think that by looking at repossession rates, that we are already in recession… but not if you look through the prism of unemployment.
“It's just incredible,” says DiMartino Booth. “And we are seeing delinquencies rise before the layoff cycle begins.”
Why the auto-loan debacle has been largely ignored by the financial media is anyone’s guess, but historically speaking, car repossessions have been a strong recession indicator.
We’ll continue to follow this unfolding story… but, spoiler, we don’t anticipate a happy ending.
Market Rundown for Wednesday, Nov. 9, 2022
S&P 500 futures are down 0.35% to 3,820.
Oil is down 0.60% to $88.40 for a barrel of WTI.
Gold is down 0.20% to $1,712.80 per ounce.
And Bitcoin’s slumping: down over 3% to $17,610.
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