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SUBPRIME STRESS

Auto loans are a segment of the consumer finance market that has been seeing recent stress. Rikard Bandebo, chief economist at VantageScore, which develops credit scoring models, said his firm has seen delinquency rates for auto loans continue to rise to historic highs. "Lower-income households continue to have higher delinquency rates, but their delinquency rates have stabilized over the past year and a half, while delinquency rates at middle- and higher-income households are increasing," Bandebo said. Analysts said that companies such as Tricolor, with operations in six states, were exposed to trends hitting lower income workers. Tricolor sold cars and provided auto loans mostly to low-income Hispanic communities in the Southwestern United States, saying it saw an opportunity to serve "invisible" workers with no access to bank accounts or other forms of credit. Analysts said the low-income auto market has been hurt by affordability, as second-hand car prices soared in the aftermath of the pandemic and so did borrowing costs. "Subprime consumers disproportionally finance used vehicles, where values remain stubbornly high following pandemic related disruptions," said Satyan Merchant, senior vice president, automotive and mortgage business leader at consumer credit firm TransUnion. "Beyond vehicle payments, insurance and maintenance costs have also surged faster than general inflation, placing additional strain on lower-income households with limited disposable income."
Hopefully AI can bring the cost of making a car way down so people won’t need a loan anymore to buy one
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I'm not sure if it would make much of a difference in these two cases; maybe it would even hurt them more because their only profits were coming from credit. Less credit, less profit! I'm not sure if that's exactly right, though.
But the main thing to highlight here is the fraud. I don't think this is what will drag the economy down, but it's possible that other companies in the sector are in similar shape.
Anyone invested in this space needs to be careful.
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