The Coming Global Auto Abyss
Too Much Supply, Too Many Brands; Combine with Too Much Credit!
Full Report: Download pdf 25 Pages
The Federal Reserve's latest G.19 statement on US Consumer Credit indicates the US Government now holds over $1 TRILLION in car loans! How can this be?
This would indicate that a significant percentage of all US car loans are now being financed in some fashion by the US government! The problem is seen to be extremely serious when the financing of these cars is analysed.
Nearly a third of all autos are now leased with the residual values of the leases being struck to achieve low, affordable current monthly rates. Like the housing bubble in the 2008 financial crisis the question that must be asked is; are these residual values going to be achieved and if not, who is the 'dupe' holding the paper when these cars must be marked to market?
Short Answer: THE TAX PAYER!
Since a significant number of car loans are now increasing being held by owners with sub-prime credit scores it suggests that the present record car sales may be artificial and non performing loans may soon increase even further burdening further an already full capacity 'repo' industry and a crumbling wholesale auto auction market for used cars.
Research indicates that most developed economies are heavily dependent on auto exports and the broad array of feeder industries associated with the large global auto manufacturers.
Sustained easy credit since the financial crisis has fostered a global supply glut based on buyer segments who couldn't afford the cars in the first place.
Sound like the 2008 housing mortgage debacle? Sound like the student loan bubble where students can't pay the loans?
Short Answer: IT IS & IT IS GOING TO GET UGLY SOON!
What is Coming