Lenders: Subprime Auto Lending Increase Not A New Bubble

Cameron Aubernon
by Cameron Aubernon
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lenders subprime auto lending increase not a new bubble

Though subprime auto lending is growing, lenders believe a new credit bubble isn’t on the horizon as it was in the runup to the Great Recession.

Bloomberg reports 20 percent of all auto-loan originations are in the subprime category, compared to the peak of 30 percent prior to the financial collapse seven years ago. Originations climbed to $97.2 billion in 2014, compared to $86.7 billion in 2013 and $41.3 billion in 2008. Of those, $30 billion to $40 billion subprime loans were packaged into asset-backed securities; $203 billion of those loans are outstanding.

That said, Wells Fargo securities managing director Chris Pink claims those figures aren’t a sign that “the ABS market is driving a resurgence of subprime.” Ford director of long-term funding and securitization Sam Smith adds those securities differ from the ones in the mortgage industry, stating that auto lenders aren’t “originating contracts just so [they] can securitize them.”

The move to temper those concerns comes as the U.S. Justice Department began investigating the market for subprime securities, with a focus on preventing a repeat of the housing bubble that led to the Great Recession.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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  • APaGttH APaGttH on Feb 11, 2015

    ...Subprime Auto Lending Increase Not A New Bubble... And oil is going to go to $100 a barrel by June - just wait and see! ;-)

  • El scotto El scotto on Feb 11, 2015

    The simple reality is that some working poor have to take a sub-prime loan because that's all the financing they can get. Public transportation isn't feasible for them (below pizza delivery guy and construction laborers who worked where the bus doesn't go yet) and they tote the note for a usually overpriced ride that they bought so they can get to their job. The crux is will they be able to pay their sub-prime loan on time and eventually pay it off and be smarter when it comes (probably sooner than later) to buy their next hooptie? The pizza delivery guy I was following into my complex last night was driving an Avalon that was so old the paint was faded and peeling. He was delivering damn good pizza. I just think many people like pizza delivery drivers, construction workers, and store clerks are"invisible" to many of the B&B. But still very necessary.

  • JohnnyFirebird JohnnyFirebird on Feb 11, 2015

    I've dug myself out of the subprime loan hole, it's not the most fun thing to do in the world to go through all the black marks on your credit report, call them one by one, and stop buying video games, seeing movies, or going to nice restaurants for two years in order to fund debt repayment. But I also don't have kids so it was easier for me than most.

    • SCE to AUX SCE to AUX on Feb 11, 2015

      Congratulations on knuckling down and not giving up. I hope things are better now.

  • Don1967 Don1967 on Feb 11, 2015

    So many commentators are focused on avoiding another 2008, oblivious to the fact that history never repeats itself in 7-year cycles. Wanna know the future? It's whatever the greatest number of people are not predicting.