Subprime Auto Loans Climb to Highest Level Since Financial Crisis

Ronnie Schreiber
by Ronnie Schreiber
subprime auto loans climb to highest level since financial crisis

Alan Zibel and Annamaria Andriotis of the Wall Street Journal (subscription required) report that consumer loans to borrowers with bad credit, including those for cars and light trucks, are now approaching 40% of loans issued, the highest percentage since the start of the financial crisis in 2007-08.

Almost four of every 10 loans for autos, credit cards and personal borrowing in the U.S. went to subprime customers during the first 11 months of 2014, according to data compiled for The Wall Street Journal by credit-reporting firm Equifax.

That amounted to more than 50 million consumer loans and cards totaling more than $189 billion, the highest levels since 2007, when subprime loans represented 41% of consumer lending outside of home mortgages. Equifax defines subprime borrowers as those with a credit score below 640 on a scale that tops out at 850.

Part of the increase in subprime loans is attributed to new companies that aren’t traditional banks entering that market. Large banks have reduced their portfolios of riskier loans due to increased scrutiny by regulators in the wake of the financial crisis. The new lenders say they are being more diligent than subprime lenders have been in the past, saying that they are only giving loans to borrowers in the top bracket of bad credit scores and actually reviewing bank account and income histories.

In case you’re nervous, subprime mortgages, whose derivative securitizations were at the heart of the financial meltdown, and which made up about 20% of mortgages in 2008, have not increased and currently make up less than 1% of mortgages issued.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS

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12 of 42 comments
  • Rich Fitzwell Rich Fitzwell on Feb 21, 2015

    OK, so the "little guy" with bad credit is taking on too much debt, so what. What about Tesla at the other end of the spectrum? No matter if you are red state or blue state (I blame the Fed), Telsa is a welfare queen writ large and a Wall Street backed con job. The Nevada gigafactory is laughable yet nobody questions the Wall St promotional machine. Telsa is not Google.

    • See 9 previous
    • 28-Cars-Later 28-Cars-Later on Feb 23, 2015

      @jetcal1 "May the Schwartz be with you" +1

  • 50merc 50merc on Feb 22, 2015

    Another good post, Ronnie. Don't let the statists bug you. And I appreciate the reference to the Elders of Zion. That is indeed an automotive-related topic, via crazy old Henry the First. Odd that no one ever published a book titled Protocols of the Elders of Protestantism. (John D. Rockeller, ardent Baptist; Andrew Mellon and J. P. Morgan, Episcopalians; John Jacob Astor, Reformed Dutch; Sam Walton, Presbyterian.) And hey, there's another suspicious bunch of influentials worth looking into. They call themselves Freemasons...

  • Bullnuke Well, production cuts may be due to transport-to-market issues. The MV Fremantle Highway is in a Rotterdam shipyard undergoing repairs from the last shipment of VW products (along with BMW and others) and to adequately fireproof it. The word in the shipping community is that insurance necessary for ships moving EVs is under serious review.
  • Frank Wait until the gov't subsidies end, you aint seen nothing yet. Ive been "on the floor" when they pulled them for fuel efficient vehicles back during/after the recession and the sales of those cars stopped dead in their tracks
  • Vulpine The issue is really stupidly simple; both names can be taken the wrong way by those who enjoy abusing language. Implying a certain piece of anatomy is a sign of juvenile idiocy which is what triggered the original name-change. The problem was not caused by the company but rather by those who continuously ridiculed the original name for the purpose of VERY low-brow humor.
  • Sgeffe There's someone around where I live who has a recent WRX-STi, but the few times I've been behind this guy, he's always driving right at the underposted arbitrary numbers that some politician pulled out of their backside and slapped on a sign! With no gendarmes or schoolkids present! Haven't been behind this driver on the freeway, but my guess is that he does the left lane police thing with the best of 'em!What's the point of buying such a vehicle if you're never going to exceed a speed limit? (And I've pondered that whilst in line in the left lane at 63mph behind a couple of Accord V6s, as well as an AMG E-Klasse!)
  • Mebgardner I'm not the market for a malleable Tuner / Track model, so I dont know: If you are considering a purchase of one of these, do you consider the Insurance Cost Of Ownership aspect? Or just screw it, I'm gonna buy it no matter.The WRX is at the top of the Insurance Cost pole for tuner models, is why I ask.