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What Bubble? Auto Loans Smash 2014 Record.

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posted on Mar, 5 2015 @ 01:51 PM
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CNN Money - Revved up car loans blow past record in 2014


Figures from two consumer credit tracking firms, Experian and TransUnion, show record amounts of auto loans on the books at the end of 2014. Not only were drivers buying more cars than any year since 2006, but they were spending more on each car they bought.




Concerns of a bubble in subprime auto loans reported at the end of last year are not backed up by the numbers, according to Melinda Zabritski, senior director of Experian's automotive section. Related: Cool cars from the Geneva auto show "We're not seeing it," she said. "If I'm comparing today's market to the lack of subprime financing in 2009, sure there's growth. But compared to last couple of years, it's pretty stable. It appears to be well managed."


Auto sales and loans in the final quarter of 2014 break the previous record in 2014. Sounds pretty good right? It's just a sign of our economy "improving". What could go wrong?

The issue is a bunch of these loans are Subprime, just like in the Real Estate bubble back in 07/08. Although these loans are a lot less than mortgages they could still wreak havoc if this bubble is popped. If you read past the media and "experts" hype you would see things aren't as peachy as they seem. Such as this little snippet from the article:



Average payments rose a bit more slowly, thanks to borrowers taking out longer-term loans and better credit scores of borrowers resulting in lower interest rates. The average new car loan was $482, up $11, while the typical used car loan was $355, up only $3.


This to me shows that the economy is still weak since borrowers have to take out longer loans so their payments end up being less.

A common misconception about the car business is that these companies make money by making and selling cars. Wrong! They make the majority of their money through financing these cars. That's one reason why the American Auto Makers had trouble in 08. Now other industries, such as retailers, are doing the same thing.

I worked in the car business for about 7 months last year and I can tell you the majority of people coming in and buying cars would be considered Subprime. Many were upside down in their current car (owed more than it was worth), which is a big factor in your monthly payment if you trade in. Cash for Clunkers also removed a bunch of used cars off the market and caused a rise in used auto sales, which are now crashing back to earth.

However this bubble probably isn't going to pop on it's own it will probably be the result of some other industry crashing such as...

Oil. The majority of the economic growth we have seen since 2008 has been because of oil fracking. I had several customers buy cars from me that worked in the oil fields. When their fracking job disappears because of the crash in oil prices, how are they going to afford their $400 - 500 payment? Many of these people don't just have one auto loan but two!

It's not just the Auto bubble that's going to pop either. There's a bubble in the Tech Market (NASDAQ hits 5,000), student loans, a re-inflated housing bubble, and most importantly a Dollar bubble.



edit on 5-3-2015 by asmall89 because: (no reason given)




posted on Mar, 5 2015 @ 01:55 PM
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a reply to: asmall89

Good thread OP and the fact loans are hitting record highs speaks volumes. They have to give out 10 year car loans just to keep it floating.




Take a good hard look and see simple truths.



posted on Mar, 5 2015 @ 01:55 PM
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Delete
edit on 5-3-2015 by SubTruth because: (no reason given)



posted on Mar, 5 2015 @ 02:17 PM
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a reply to: asmall89


Vehicles are the worst investment....period.

If I don't fully own the car that I drive....I won't drive it.

Wake up folks. I don't care who u r trying to impress...it's a waste of your time and money.

If it gets you from point A to point B....That's all you need.

sheesh.

Other than that....it's just a status symbol. Nothing more or less.



posted on Mar, 5 2015 @ 02:24 PM
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a reply to: MagesticEsoteric

I agree. I wish I didn't take one out, but I needed a reliable car. Also people shouldn't buy and especially finance used at dealerships. You'll over pay and it'll take forever to build equity



posted on Mar, 5 2015 @ 02:26 PM
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originally posted by: MagesticEsoteric
a reply to: asmall89


Vehicles are the worst investment....period.

If I don't fully own the car that I drive....I won't drive it.

Wake up folks. I don't care who u r trying to impress...it's a waste of your time and money.

If it gets you from point A to point B....That's all you need.

sheesh.

Other than that....it's just a status symbol. Nothing more or less.






Investment......Not unless you are rich........Needed.........Yep.



posted on Mar, 5 2015 @ 02:26 PM
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I must be living in double world today.
edit on 5-3-2015 by SubTruth because: (no reason given)



posted on Mar, 5 2015 @ 02:28 PM
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a reply to: MagesticEsoteric

I own 2 vehicles. A 2001 GMC Z-71 4x4 with 150,000 miles and a 2007 Pontiac Vibe 3 cylinder standard shift with 50,000 miles. I'll drive them until the rust falls of.



posted on Mar, 5 2015 @ 02:28 PM
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a reply to: SubTruth


It's not just you.

It's not just you.



posted on Mar, 5 2015 @ 02:36 PM
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a reply to: asmall89

Sometimes folks don't have a choice. I get that 100%. In the past, I've had to finance a car (piece of crap of course) but, I had no other option. I can't judge people for being in the same situation as me in the past.

I'm not in my early 20's anymore and I have options. I opt to NOT have a burdensome car payment.

It's bad enough that I have a damn mortgage to worry about.

The car I own may not be much but, It's mine...free and clear.

( Jeep Cherokee by the way...and, I Love It!)



posted on Mar, 5 2015 @ 02:42 PM
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Good thread. I never thought about auto loans being a threat to our economy before. I usually look at student loans and mortgage loans being the main security risk. Now, Credit card debt is also a problem, some states allow the companies to put a lean on a person's home now if they do not pay. This could be a problem if someone stole your identity and ran up some bills without you knowing, they just stick a lean on your home which you will not know of until you sell it. Remember, the address is also probably different, you won't know anything till after the fact.



posted on Mar, 5 2015 @ 02:55 PM
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originally posted by: SubTruth

originally posted by: MagesticEsoteric
a reply to: asmall89


Vehicles are the worst investment....period.

If I don't fully own the car that I drive....I won't drive it.

Wake up folks. I don't care who u r trying to impress...it's a waste of your time and money.

If it gets you from point A to point B....That's all you need.

sheesh.

Other than that....it's just a status symbol. Nothing more or less.






Investment......Not unless you are rich........Needed.........Yep.


Financially speaking for my household, anything over $1,000 is considered an investment.

It may also fall into the category of an necessity. This category seems to be the most popular one (SHOCKER!)

Gotta love living in the "middle class" right?

We have it made.



posted on Mar, 5 2015 @ 03:06 PM
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The girl just took out a car loan to buy a car- a 2002.

She had to borrow money to buy a car that is 13 years old.

Banks almost never lend money for cars that old, because at that age it's more likely they'll die before the loan is paid off.


And yet, the income of your average person vs what a car costs (thanks cash for clunkers!) not everyone can afford to buy an old used car anymore.

Sign of the times...


edit:
since it was financed, it has to have the expensive insurance, AND it has to be from a dealer- which of course, the same car would cost 40% less private sale- but not everyone has a couple grand in the bank, so they're sucked into this scheme...

edit on 5-3-2015 by lordcomac because: (no reason given)



posted on Mar, 5 2015 @ 09:07 PM
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a reply to: MagesticEsoteric

To be truthful I would have it that way too. In fact I wish I didn't need a car but I have to live in the area I do because of it's affordability and thus have to commute everywhere.

My car wasn't that expensive, I got a decent deal on it because of where I worked. However because of Cash for Clunkers I suspect the car was probably overvalued $5700 for a 03 Honda Accord with 127k miles on it.

a reply to: lordcomac

That pretty much sums up my situation. No savings = having to finance. It seems like you can finance everything these days. Fridgerator, your TV, your laptop, your clothes, probably soon your food.



posted on Mar, 5 2015 @ 10:41 PM
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The car loan bubble may not burst first but it is starting to sees some problems.

Car Loans See Rise In Missed Payments

I'm trying to find further stats on it but with the subprime lending it is only logical it would lead to missed payments. I know that this doesn't mean repossession is on the rise. Personally I think the banks are really holding back on that for it defeats the economy is fantastic story they spread. Car loans are on the rise for sure though. the total balance of auto loans in December 2014 is $975 billion


Student loans have become the second largest source of personal debt in the United States.
Personally I am wondering when the student loan bubble hits a road block but the truth I do know is as long as we are the reserve currency we can handle all these bubbles for if they do pop they are only temporary.



posted on Mar, 6 2015 @ 12:18 AM
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a reply to: TacticalStats

Wow I didn't know about the missed payments. Looks like trouble is brewing. You're right though the auto loan bubble is going to pop as a result of something else. My guess is an oil & tech crash. Student loan and auto will be after effects.

As far as whether the next crash will be temporary I personally doubt it. In an effort to prop up the economy again the Fed will issue QE 4. Though this may help shortly the rest of the world will get tired of measuring everything in inflated dollars and move away from them.

I think the Government knows how valuable having the dollar be the reserve currencey, which may be why we are seeing rising tensions with Russia and the ME.




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