by Wolf Richter, Wolf Street:
But these are the good times. Automakers are not amused.
The auto industry depends on subprime-rated customers that make up over 21% of total loan originations. Without these customers, the wheels would come off the industry. And tightening up lending standards to reduce risks would cause serious damage to the undercarriage. Subprime lending is very profitable – until the loans blow up – because interest rates can be high. But those subprime auto loans are blowing up at rates not seen since the worst days of the Financial Crisis – and these are the good times!