Are these any signs of worry for the auto sector? Though experts have discounted any major crisis on the immediate horizon, the truth is no one really knows the amount of compromised loans and what kind of impact it may have on the other financial systems.
About 21% of new auto loans made in the first half of this year went to subprime borrowers, a slight increase from last year’s pace.
In fact, banks and finance companies are making increasingly longer-term loans for cars, a sign they’re taking more risk by waiting longer to get fully repaid. The terms of loans reached record highs in the second quarter, averaging 72.9 months for subprime new vehicle loans, according to Experian.
Some loan terms have increased to 84 months, in both prime and subprime auto ABS deals. That can weaken auto-bond performance when credit conditions sour, according to a recent report from S&P.
