Try looking behind the sensationalizing, the hyper

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Subprime auto lending is actually getting better

https://www.yahoo.com/news/subprime-auto-lend...44512.html

Some headlines have warned that a frenzy of defaults on subprime auto loans could be looming, while drawing breezy parallels with the disastrous effects of the housing bust.


But the comparison is bogus.

For one thing, the mortgage market is eight times larger than the auto-loan market, making it far more important to the overall economy. When foreclosures pushed millions of homeowners out of their properties during the housing bust, it shook the foundations of the US banking system. The auto-loan market simply isn’t big enough to have a similar effect.

Defaults on car loans are also much easier to process, since a car can be repossessed and resold in a matter of weeks, keeping the lender more or less whole. And some car owners actually prioritize their car loan over other commitments when money gets tight, because they need a vehicle to get to work.

While losing a home and becoming a renter can certainly be traumatic, it can actually be less financially damaging that losing your means of transportation.

An improving economy, such as we have now, helps stressed borrowers as well, since they’re less likely to get laid off and might even get a raise. In fact, one cause of rising default rates earlier this year was layoffs in the energy industry, which are abating now that oil prices are rising and drillers are getting back on their feet.

If you’re a subprime borrower who can’t make payments, your personal economy is certainly under stress. But the broader economy isn’t.

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