Analysts Continue To Beat The Drum On The Threat Of Subprime Auto Loans

The latest data on U.S. car prices shows the auto market continues to deteriorate in 2017. Weekly data from Black Book revealed a 20 percent year-over-year decline in used car prices and a 17-percent decline in used truck prices. Year to date, used car and truck prices are both down 17 percent.

Taking Auto Lenders' Temp

Auto lenders, including Wells Fargo & Co WFC, Fifth Third Bancorp FITB, Citizens Financial Group Inc CFG and Regions Financial Corp RF, reported declining recovery rates in the first quarter.

Even new vehicle sales are slumping. This week, Ford Motor Company F announced it's cutting 10 percent of its global workforce in an effort to reduce costs. The U.S. auto giant reported a 35 percent decline in net sales in the first quarter.

Recent data from the New York Federal Reserve revealed that auto loan delinquencies of at least 30 days are currently at their highest levels since 2008. The report also notes that there is currently more than $8.24 billion in auto debt that is delinquent by at least 90 days.

Related Link: Meet The Companies Most Exposed To Subprime Auto Risk

According to Height Securities analyst Edwin Groshans, the softening in the auto market will impact subprime lenders the most.

“We see trends that will continue to decline post the seasonally string spring selling period,” Groshans explained.

“The combination of lower used car auction prices and weakening credit quality will manifest itself in the operations of auto finance companies with subprime lending concentrations.”

Height names the following subprime lenders as particularly at-risk:

• Credit Acceptance Corp. CACC.
• Santander Consumer USA Holdings Inc SC.
• Ally Financial Inc ALLY.
• Capital One Financial Corp. COF.