Why are auto-loan defaults surging, and does it pose a broader economic threat?
Together, that's meant more expensive cars, more subprime borrowers, and longer-term loans. And that's contributed to higher monthly loan repayments., according to Experian data. The average interest rate also hit a decade high, little surprise given the record number of subprime borrowers, who pay higher rates to compensate for their risk.
Changes in delinquencies"necessarily lag changes in loan underwriting," Goldman explains, so we're feeling the brunt today of poor underwriting in previous years. The tightened lending standards since 2017 may not show up in delinquencies till next year.
There's been a two-tiered recovery, UBS analyst Matt Mish explained, where on one hand, those who hold assets have done very well.
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