Ritholtz: Subprime auto loans very different than subprime mortgages

Essentially a core group of borrowers on new auto loans is coming from the subprime variety. Of course some pundits would like to point out that this is a "small" portion of the total auto loan market. This argument has parallels to what we heard about subprime debt in housing. These are your super marginal borrowers.

The subprime auto lending business is highly cyclical. For example, according to Bloomberg, citing Moody’s data, 41 subprime lenders filed for bankruptcy during the subprime auto loan bust between 1997 and 1999. But unlike subprime home mortgages, subprime auto loans won’t take down the financial system.

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Subprime loans typically have higher interest rates and less favorable terms than prime loans. If you have a checkered past when it comes to your credit, you may be offered a subprime rate. When it comes to mortgages and auto loans, you may need to make a larger down payment to qualify.

The amount of so-called subprime auto loans is increasing, and many Wall Streeters see similarities to the housing market before the financial crisis.

The subtext is, this is how we got in trouble with the mortgages, isn’t it? No, it’s not. The difference. very little cushion for defaults. The expansion of car loans is nothing like that. “It’s a.

While losses from soured car loans would be far less than those on subprime mortgages, the red ink could still deal a blow to the banks not long after they recovered from the housing bust. Losses from auto loans might also cause the banks to further retrench from making other loans vital to the economic recovery, like those to small business.

Subprime auto loans today vs subprime mortgages in 2008 via. mortgages were worth almost $11 trillion and represented 76 percent of household loans.. the very nature of a real estate loan is.

On top of that, she had a credit score below 500, which is considered very risky. overall delinquency rate for auto loans was pretty stable, and the majority were performing well. But subprime.

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Dimon went on to say that "someone" won’t be JP Morgan Chase, which has very. loans are not like the risks of subprime mortgages. For starters, there’s a big difference in how the collateral is.

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Fitch’s subprime ANL index hit 10.4% through February 2017, 7% higher year-over-year. That’s its first push above 10% since 2009. fitch late payments (very. subprime auto loans are a much smaller.