Throughout 2016 there have been rumblings that increasingly loose auto credit is inflating an economic bubble alongside record-level sales of new cars and trucks. Prominent figures such as JPMorgan Chase CEO James Dimon and comedian John Oliver have poured varying amounts of fuel on such a fire.
A report released earlier this month by credit-tracking firm TransUnion seemed poised to add a further can of gasoline. TransUnion?s report projects that serious borrower-level delinquency rates on auto loans will have risen by 21 percent over the five-year period from 2012 to 2017. It defines ?delinquency? as a loan that is 60 days or more past due.
TransUnion expects an overall auto loan delinquency rate of 1.4 percent in the fourth quarter of this year, a 7 percent rise from 1.3 percent in the same period of 2015. So auto loan defaults are climbing. But despite this evidence, TransUnion economist Jason Laky said that such a trend does not necessarily signal a bubble, especially given the fierce rebound of U.S. auto sales since the bleak days of 2008 and 2009. ?The auto industry during the recession took a big hit, new-car sales dropped in 2009, then went on a path to recovery that was pretty swift compared to other parts of the economy,? he said.
As a result, auto lenders were among the first in the banking sector to bounce back from the economic downturn, he said. As lenders have become more comfortable, they have also begun to reach out to more subprime borrowers, who are typ...