Auto Loan Delinquencies Are At RECORD HIGHS And The COST Of Vehicles Are Only Going UP — This Can't Be Good, Right?

Automobile-loan delinquencies are at a record high, but experts say this may not impact your ability to get a loan for your car purchase.

In the fourth quarter of 2019, the outstanding balance on automobile loans and leases hit a record high of $1.33 trillion, according to data from the New York Federal Reserve, up nearly 5% from the year-earlier period.

Some $66 billion, or 5% of the outstanding loans, are over 90 days delinquent, up from $57 billion for the same period last year and $35 billion a decade ago...

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PUGPROUD - 2/23/2020 4:15:33 PM

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Like Thelma and Louise industry headed full speed toward a cliff.

MDarringer - 2/23/2020 5:01:30 PM

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If you can't pay in 60 months, you can't afford the vehicle.

We'll write 72 month contracts, but people who want 84 or 96-month contracts, we won't write them. But banks will.

We also will not put old debt onto a new loan because that always backfires on the customer.

Nissan being so desperate for sales is in trouble as is Mitsubishi with its 84 month Mirage loans.

ricks0me - 2/23/2020 7:28:38 PM

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Matt: You won't write 84 or 96 month contracts... but banks will

You are using bank money for the financing or am I wrong about this??

MDarringer - 2/23/2020 9:05:31 PM

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I'm making a distinction between say a "Ford Credit" contract for example and a person walking in pre-approved by their bank.

If you write contracts on the manufacturers' lending agencies and those contracts go belly up, it will haunt you. Trust me.

If a person's bank wants to be foolish and do 84 or 96 month loans and the person defaults, it's not blowing back on me.

Manufacturers' lending arms will sometimes allow stupid loans (84 months on a Mitsubishi Mirage for example), but that doesn't mean you should write them just because you can.

The biggest reason NOT to write those crazy loans as a dealer is that if the person defaults and the car is repossessed, they will bad mouth the dealer rather than take responsibility for their fiscal idiocy.

ricks0me - 2/24/2020 4:43:00 AM

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Got It ... Thanx / Rick

MDarringer - 2/24/2020 8:34:19 AM

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We were able to acquire a dealer because the owner was asked to relinquish his franchise so to speak because they were writing loans and the default rate was high. They were the Saul Goodman dealer and cleaning up that mess meant essentially hiring a new staff and then bird-dogging everything.

People don't realize that manufacturer credit depends on the dealer being the gate keeper sort of on the loans. But dealers know that the lending arm of the manufacturer isn't as eyes on the prize as it should be. Yet, when the shit hits the fan, they are on top of it. They do keep track of a dealer's default rate, so you're punished by the people that walk through the door if you decide to take advantage of the lax attitude of manufacturer lending.