Nov 9, 2019

Car loans are dragging Americans underwater

Illustration: Sarah Grillo/Axios Visuals

More people buying new cars with trade-ins have negative equity than in previous years, the Wall Street Journal reports, and those borrowers already carry more car debt before taking on new, steeper loans.

Why it matters, per the WSJ: "Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value."

What's happening: Consumers and their lawyers tell the WSJ that new vehicle trade-ins are necessary for changing needs, car malfunctions or life circumstances, like growing families.

  • Negative equity, higher interest rates and monthly payments, and longer loan terms are trapping consumers in "a cycle in which each new trade-in leaves them deeper underwater," per the WSJ — and easy lending standards are fueling the cycle.
  • "Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt," the WSJ reports.

The big picture: In February, the number of Americans with auto loans 90 days past due shot to a new record high — 7 million — yet, auto lenders have been issuing more and more loans in recent years.

Go deeper: Car loans mean banks don't need high interest rates to rake in cash

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High-tech cars drive auto loans to record highs in the U.S.

Photo: Carl Court/Getty Images

Loans for new and used cars hit a new record in the third quarter, as consumers continue to opt for cars with newer technology and higher price tags, Bloomberg reports.

Why it matters: Auto debt in the U.S. continues to grow and topped $1.32 trillion in the third quarter — up $50 billion from last year, Bloomberg notes. The number of 90-day car loan delinquencies also increased from 4.27% last year to 4.71%.

Go deeperArrowDec 7, 2019

Consumers scaled back plans to buy a new car in October

Data: The Conference Board; h/t Deutsche Bank’s Torsten Slok; Chart: Axios Visuals

Consumers scaled back plans to buy a new car last month.

Why it matters: It may signal consumers' lack of confidence in the staying power of the U.S. economy.

Go deeperArrowNov 22, 2019

Capital markets are eyeing the world's soaring debt

Illustration: Aïda Amer/Axios

The world's debt is rising to unprecedented levels. While politicians and the general public have seemingly lost interest, capital markets are beginning to show signs of strain, financial experts say.

Driving the news: Global debt surged by $7.5 trillion in the first half of the year, hitting a new record of more than $250 trillion, according to data released Thursday from the Institute of International Finance.

Go deeperArrowNov 15, 2019