Auto Loans: The Next Debt Bubble? Tags Booms and BustsU.S. Economy22 hours agoShaun BradleyAfter nearly a decade of being able to borrow money for next to nothing, interest rates are finally beginning to creep higher. Even the relatively small increases seen so far have caused problems in the previously booming automobile industry. The size of the auto loan market has ballooned to a historic .1 trillion, and subprime lending has once again become the norm. Teaser offers that allow people to get cars with zero money down and 84-month financing have fueled a wave of irresponsible spending. Americans’ tendency to associate success with having nice things has driven many people who can’t afford to buy a house to get the next best thing — a brand new car. Credit: WolfStreet.comThe data released so far in 2017, however, has started to raise questions about how much longer these spending habits can last. There has been a significant drop in new car sales and a sharp increase in the delinquency rates of subprime borrowers. Inventories across the country have started to build up, and if things don’t turn around soon, the excess cars sitting on lots will eventually force prices lower. According to analysts at Morgan Stanley, price declines will also impact the used car market, and some predictions are calling for up to a 50% decline by 2021.
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