I don’t see a subprime car loan problem
AutoNation CEO Mike Jackson told CNBC on Wednesday that he sees no signs of trouble in the auto loan market, even though Wells Fargo said it would cap loans to borrowers with bad credit.
Jackson said the auto industry has issued $3.5 trillion in loans to fund auto sales over the past decade. Meanwhile, the outstanding balance of that loan volume has only increased by $100 billion, he said on “Cry box”.
“Think about it. $3.5 trillion in sales and the outstanding balance went from $800 billion to $900 billion. The fact is people are paying their auto loans,” he said.
Wells Fargo, one of the nation’s largest subprime auto lenders, said Monday it would limit the amount of subprime loans it issues to 10% of its total loan origination.
According to new data from Experian, the number of car loans with terms of six years or more has increased recently, as borrowers aim to keep their monthly payments low. More than 25% of new auto loans have terms that span six to seven years, the company reported Wednesday.
Jackson said he’s not a fan of “very long-term loans,” but said it’s important to look at all financing, including leasing.
“Actual loan terms actually went from 57 months to 56 months when you include financing and leasing,” he said.
AutoNation recommends customers who want a lower payment rent so they have options at the end of their contract, Jackson said.
Less than 5% of AutoZone’s sales last year were funded by subprime loans, he added. Meanwhile, delinquency rates are around 5% on subprime loans, compared to around 3.5% on total loan volume, he said.
On Wednesday, AutoNation reported sales of nearly 24,000 vehicles, with negative care sales offset by strength in high-end luxury vehicles and trucks.
The truck supply chain is ‘stretched to its absolute limit’, Jackson said, adding that auto plants are working three shifts to meet demand and there are too few railcars to deliver the largest vehicles. to dealers.
“Quite frankly, the trend towards trucks – until we get back to $3.50 a gallon – I don’t see it abating at all. It’s trucks, trucks, trucks,” said he declared.