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Subprime auto loan defaults rising sharply

subprime

Financial vultures are making dicey subprime auto loans and default rates are rising sharply. Combine this with student loan defaults and plunging oil prices putting people out of work and we could be heading towards another financial crisis no one could ever possibly have predicted.

Over 8.4% of subprime auto loans taken out in the first quarter of 2014 were already delinquent by November, according to an analysis of Equifax data by Moody’s Analytics for the Wall Street Journal. That’s the highest rate of early subprime delinquencies since Financial-Crisis year 2008.

Auto sales have been a big force in boosting retail sales, consumer spending, manufacturing, transportation (trucking, railroads), and service activity. So when the auto subprime bubble pops, it won’t take down the financial system; but it will hit the broader economy.

Let’s hope – knowing that hope is not a strategy – that it doesn’t pop in synch with another debt-fueled economic miracle, now imploding, the shale oil and gas boom. Because that would knock down in one fell swoop the two major growth industries that have largely been responsible for whatever “recovery” we’ve had in the US.

And if you’re fortunate enough to own your car, the title loan industry will be happy to gouge you with interest rates from 80-500%. One would think governments would regulate such gouging, charging rates that loan sharks used to go to prison for but no such luck. Title loan companies finance what they can sell the car for and don’t care if you default. They just sell the car and make money in the process.

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