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March 5, 2015

From the Vault: Tracking Subprime Auto Loans

Recent news of banks scaling back on the issuance of car loans to borrowers with a weak credit history, coupled with recent media investigations into auto lending fraud, have drawn renewed attention to a surge in subprime auto lending. That boom is one we’ve tracked on our blog as part of an effort to shed light on ongoing change in the consumer lending market.

For descriptive statistics and perspective on the trend, check out “Just Released: Looking under the Hood of the Subprime Auto Lending Market,” a post from our vault. In that post, we used the New York Fed’s Consumer Credit Panel (a nationally representative sample of borrowers drawn from anonymized Equifax credit data) to break out auto loan originations by credit score, documenting—among other things—a rough doubling in the dollar value of loans to subprime borrowers from 2009 through mid-2014. (The data are downloadable under a “Chart Data” link in the post.)

Equifax economists recently urged caution in spinning worst-case scenarios from such data, arguing that “subprime is a well managed and stable subset of automotive lending” as well as an important driver of the automotive industry recovery. In an earlier piece on Liberty Street Economics, our bloggers also expressed a tempered view of the subprime lending increase, noting no evidence of a “disproportionate” or “unusual” volume of new loans being issued to riskier borrowers.

Last month, we reported that while auto loan delinquencies (ninety-plus days past due) for all borrowers had steadily improved since their peak in the Great Recession, they ticked up in the fourth quarter of 2014. We continue to track the data with interest for the New York Fed’s Quarterly Report on Household Debt and Credit and will share new insights on the blog.


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.


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While I appreciate your desire to temper caution in the surge in subprime auto loan origination, I am skeptical given the history of past economic prognostications that emerge from the various FRB banks. I seem to recall that 2008 was a big surprise for all the world’s finest economists.

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