Cracks in the Engine: Is the Auto Industry Eroding from Within?
Download MP3Episode Highlights:
- What’s Happening in the Automotive Industry:
- Subprime borrowers are starting to miss loan payments, especially those with bad credit or non-standard loans.
- Early signs of trouble at the bottom end of the market; potential implications for the broader economy and automotive industry.
- Changes in the Subprime Automotive Market:
- Significant consolidation in the last two to three years.
- Transition from small mom-and-pop dealerships to large chains like Carvana or hedge fund-backed lenders.
- Concerns about loan underwriting practices, with some loans being approved directly at dealerships.
- Parallels to the 2007–2008 Financial Crisis:
- Limited transparency and questionable underwriting processes raise alarms.
- Potential for toxic loan inventory to grow in the subprime sector.
- Rising Used Car Values Mask Issues:
- Skyrocketing car prices have temporarily reduced the risk of being upside down on loans.
- If used car values drop, lenders could face significant losses when repossessing and reselling vehicles.
- Key Questions for Stakeholders:
- Dealers: Are underwriting requirements becoming more stringent for subprime loans?
- Consumers: Have you noticed changes in the car purchase process?
- Lenders: Are there updates to approval or funding processes internally?
Join the Conversation:
Share your thoughts and experiences in the comments. Let us know what you think about these emerging trends in the automotive and lending industries.
Share your thoughts and experiences in the comments. Let us know what you think about these emerging trends in the automotive and lending industries.
