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EDITORIAL
I’m sure that many of you have recently seen the Headline; “Car repossessions are surging — a troubling sign for the used car market”. It’s all over the internet in various news feeds. It’s a great attention getter, but is there any truth to it? What do you think or see?
According to Lisa Beilfuss Popeo, a senior writer for Barron’s magazine, “Repossessions of vehicles are surging, and have even doubled among so-called “prime” borrowers, or people with good to excellent credit scores who are considered the least likely to default on their lows.” Well, it’s a nice headline, but I haven’t seen any evidence of it in any data points that would lead up to it.
I follow the Experian data quite close and have seen nothing dramatic in delinquencies to suggest that we would be in a “surge” of repossessions at this time. But of course, there really is no one, central data aggregator for repossession activity across the spectrum of lenders. I’d approached Experian about this but they wanted $30K for data I could sell or monetize, so what would be the point?
Fact of the matter, auto loan delinquencies are only just beginning to reach the pre-pandemic levels. And let’s face it, those weren’t very high levels. Regardless, the article goes on to say that; “repossessions among prime borrowers has doubled from 2% to 4% during the past two years.”
Well, considering two years ago, in June of 2020, America was at the height of pandemic insanity. Lenders were handing out loan modifications like cheap candy as well as low interest short term loans. Repossessions had all but died as many, if not most, lenders were still not assigning repossessions. So, I suppose if that is the measuring point of reference the writers are comparing this to, I suppose they’re right.
But back to my point, delinquency always precedes repossessions. So where is the tidal wave of delinquency that would have predicated this. Nowhere, because it hasn’t happened yet. Yet!
It’s coming, that’s for sure, but rising delinquency ratios will lead the way, and I haven’t seen anything significant yet in the credit union space or any other market data point.
In the meanwhile, it appears as though the presses fascination with repossessions is rising. So, expect to hear a lot more from them when the real thing does happen. Until then, this story has some good points, but offers nothing of substance to support its claim.
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