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.
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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