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The auto-loan market has always been known as one of the "safer" ABS markets given the historically low default rates---industry insiders like to tout how you can BOTH sleep and drive your car. But defaults among subprime borrowers are beginning to tick higher, reaching 5% recently, as market breadth expands and loan terms extend past the usual five year tenor. Is the climbing charge-off rate another sign that the the US auto market plateaued?
This is confusing to auto executives, but not to analysts, who have collectively been anticipating some type of financial, economic, or simply cyclical event to affect US auto sales since, oh, about 2013. The idea seems to be that if you foretell of a downturn for long enough, one will eventually happen, and you can say you were right all along. The latest fixation among these bears is what's going on in the market for subprime auto loans. Bankers like JP Morgan Chase CEO Jamie Dimon aren't wrong when they say the market for U.S. automobile lending is "a little stressed," as he did on Thursday.
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