The auto loan bubble has gone full nut bar thanks to broke undisciplined consumers, reckless lending from dumb yield starved investors and willfully blind leaders at central banks. This report is on the US market, but similar antics have dominated in Canada and many other countries as well. The end result is a world awash in dinosaur (‘ICE’ internal combustion engine) vehicles that have been booked as ‘sales’ by auto-makers but not actually paid for that will end up in debt write-offs, investment losses and probably more taxpayer bailouts.
All of which reminds me of a refreshingly honest quote uttered by our Bank of Canada chief: “There’s a crater under every bubble. Every one.”--Stephen Poloz, May 3, 2016
In May, the total amount of auto loans cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto sales have hovered around record highs.
At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record. See: Jamie Dimon just sounded the alarm on auto loans.
When loans are too sketchy and dumb for even never-met-a-loan-he-couldn’t-flog- Jamie Dimon, you know these things are toxic sludge. Here is a direct video link.