If you’re looking for proof that we’re already in the midst of a meaningful deleveraging, look no further than car repos.
In fact, the industry is a “underappreciated ticking time bomb”, according to Barron’s. One car dealer said this week that most loans on cars currently being repossessed originated during 2020 and 2021 – a trend that differs from the norm, when origination dates are usually scattered.
“Many of the loans were extended to buyers who had temporary pops in income during the pandemic,” the dealer, who has been in the business for 20 years, told Barron’s. The monthly incomes of many who took on the loans have fallen “sometimes by half” now that stimulus programs have ended, the report says.
Consumers’ incomes were temporarily high as a result of debt forbearance, pandemic stimulus checks, enhanced unemployment benefits and PPP loans, the report says. The auto dealer says he bought a Bentley, McLaren and two Aston Martins from two buyers, now in default, who used PPP money for down payments.
“Everybody thought the free gravy train would never end,” he said. He told Barron’s he has “never seen so many people making $2,500 a month owing $1,000 a month in car payments.”
“The idea that the economy is strong? Anyone who is actually doing business sees things are not strong. We had a housing bubble in 2008, and now we have an auto bubble,” he continued. He guessed, based on data he has seen from banks, that “subprime repos have nearly doubled since 2020, to around 11% on average”.
ALL on BIDEN !!!!
hasnt stopped people from buying probably 3 out of 10 cars out there have temp tags
yeah, I’ve noticed that too. Wow.
The stimulus money during the quarantine allowed folks to make a larger down payment – without showing the income basis for the remainder of the loan!
Instead of using the stimulus to buy groceries and pay existing bills – they went out and splurged….
Time to pay the piper folks!