Do you remember the subprime mortgage meltdown from the last financial crisis? Well, this time around we are facing a subprime auto loan meltdown. In recent years, auto lenders have become more and more aggressive, and they have been increasingly willing to lend money to people that should not be borrowing money to buy a new vehicle under any circumstances. Just like with subprime mortgages, this strategy seemed to pay off at first, but now economic reality is beginning to be felt in a major way. Delinquency rates are up by double digit percentages, and major auto lenders are bracing for hundreds of millions of dollars of losses. We are a nation that is absolutely drowning in debt, and we are most definitely going to reap what we have sown.
The size of this market is larger than you may imagine. Earlier this year, the auto loan bubble surpassed the one trillion dollar mark for the first time ever…Americans are borrowing more than ever for new and used vehicles, and 30- and 60-day delinquency rates rose in the second quarter, according to the automotive arm of one of the nation’s largest credit bureaus.