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Scott Jacobs/AP

Some on Wall Street are worried that subprime auto lenders like Credit Acceptance Corp, Ally Financial, and Santander will soon be in trouble, given reports that a rising share of borrowers with low credit scores are delinquent on their loans.

Auto lenders are behaving similarly to mortgage lenders in the run-up to the 2008 financial crash, but experts say we are not headed into another crisis (more below).

Why it's still cause for worry: Lenders are making fat profits, but there is growing evidence that a significant minority are engaging in fraudulent behavior. Borrowers in many cases have little choice but to pay such high rates if they want to be able to commute to work.

The case for concern:

  • It's a growing problem: One trend that has propped up this market is lengthening American commute times. As housing affordability in America's economic centers grows worse, the working poor and middle class are being pushed further away from city centers and reliable public transportation.
  • What to do about it: Two options are incentives to build more affordable housing and investing more in public transportation.

The case against concern:

  • It's actually pretty difficult for a lender to lose money on many of these subprime loans. The interest rates are high, typically in the low teens, but can rise as high as 29%. These payments cushion losses for lenders.
  • The auto-lending market is much smaller than the mortgage market. According to Experian, the total size of subprime auto loan debt outstanding is roughly $173 billion. By comparison, in 2006 alone, mortgage lenders made more than $600 billion in new loans.
  • Cars are easy to repossess, while homes are notoriously difficult, meaning auto lenders lose less money after a default.

Go deeper

Updated 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Coronavirus deaths reach 4,000 per day as hospitals remain in crisis mode — CDC warns highly transmissible coronavirus variant could become dominant in U.S. in March.
  2. Politics: Biden says, "We will manage the hell out of" vaccine distribution — Biden taps ex-FDA chief to lead Operation Warp Speed amid rollout of COVID plan — Widow of GOP congressman-elect who died of COVID-19 will run to fill his seat.
  3. Vaccine: Battling Black mistrust of the vaccines"Pharmacy deserts" could become vaccine deserts — Instacart to give $25 to shoppers who get vaccine.
  4. Economy: Unemployment filings explode againFed chair: No interest rate hike coming any time soon —  Inflation rose more than expected in December.
  5. World: WHO team arrives in China to investigate pandemic origins.

NRA declares bankruptcy, says it will reincorporate in Texas

Wayne LaPierre of the National Rifle Association (NRA) speaks during CPAC in 2016. Photo: Saul Loeb/AFP via Getty Images

The National Rifle Association said Friday it has filed for Chapter 11 bankruptcy and will seek to reincorporate in Texas, calling New York, where it is currently registered, a "toxic political environment."

The big picture: The move comes just months after New York Attorney General Letitia James filed a lawsuit to dissolve the NRA, alleging the group committed fraud by diverting roughly $64 million in charitable donations over three years to support reckless spending by its executives.

3 hours ago - Politics & Policy

Biden: "We will manage the hell out of" vaccine distribution

Joe Biden. Photo: Chip Somodevilla / Getty Images

President-elect Joe Biden promised to invoke the Defense Production Act to increase vaccine manufacturing, as he outlined a five-point plan to administer 100 million COVID-19 vaccinations in the first months of his presidency.

Why it matters: With the Center for Disease Control and Prevention warning of a more contagious variant of the coronavirus, Biden is trying to establish how he’ll approach the pandemic differently than President Trump.