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...

  • 2ACL In addition to having two decades of wear and tear, several of these old Hondas & Acuras (namely the V6s) also have transmission design defects that would likely send them to the crusher if they manifested. I wonder how many of these recalls are still open because they're attached to cars in some state of inoperability.
  • SCE to AUX I did my own research; recalls are for chumps.
  • Kwik_Shift I don't like the sloping rear.I guess it would look too Volvo otherwise?
  • Kwik_Shift I NEVER answer calls (unless its of high importance). That is why I always suggest using email or text instead.
  • Wjtinfwb We had one of these LTD wagons in the daily rental fleet I worked while in College. It had been returned early from the lease customer and dumped into daily rental duty to milk a few more dollars out of it before it went to auction. As a lease/rental car, it's maintenance had been... eh, spotty at best. But one Friday night I needed a big car to take some friends down to the coast for dinner. The LTD was available so I grabbed the keys. Loaded with 3 couples and a cooler full of beer and wine, we set of on the 60 mile drive to the coast. The HOT light came on about halfway but there was no service station open on the drive down US 319. So we kept driving. Parked at the restaurant, food and many beers and wine ensued, we poured back into the LTD and headed back to campus. The HOT light popped on 20 miles in, so we kept driving. Dropped the wagon back at the rental lot, the V6 dieseling to a clanky end. Monday came, I figured the Ford was toast so avoided it but returned from lunch to find an associate had rented it again. Surprised it even started, I figured a rescue call was soon to be requested. Nothing. Two days later it was returned, the lady returning it said the HOT light came on, but she kept driving as everything seemed fine but she noticed a really bad smell. I drove it around back, popped the hood and started checking fluids; radiator, dry as a bone. crankcase, no oil on the dipstick. Even the transmission and power steering fluids were MIA. I filled the radiator with tap water, poured 3 quarts of 30 weight Quaker State in to the filler and slammed the hood. Eventually, the thermostat was replaced as the cause of the overheating but the LTD kept running until I got fired for wrecking a Fairmont. Tough car...