The Falling Domino

The Auto Market…

In late 2020 car manufactures were able to ‘save’ the falling auto market by introducing reduced supply of new vehicles, blaming ‘chip shortage’ and ‘transportation’ costs as primary basis for the supply shortage. Now that the market ‘recovered’ and ‘hyper-inflated’ as the result, a hidden danger is looming just around the corner!

Today Americans owe more than $1.5 Trillion in Auto loan debt, which makes up roughly 10% of the total consumer debt. Some states/regions even go as high as 20% . As of today, 1 in every 12 Americans is at least 90 days late on their auto payments with repos skyrocketing as we head into Q2 of 2022.

Another shocking statistic that many economists overlook is the fact that over 80% of buyers are paying more than the MSRP (Manufacturer’s Suggested Retail Price), which is an increase of nearly 26,566.67% since 2020, when only about 0.3% of consumers were paying over the MSRP. These are shocking numbers, since the average US wage rose by a mere 4.4% since December 2020 to late 2021 according to the Employment Cost Index (ECI) data from the Bureau of Labor Statistics (BLS).

Now, why are we looking at the car market and calling it ‘The Falling Domino’? Because anytime the economy tumbles, cars are one of the first things people stop paying for and fall into delinquencies, which in turn has a domino effect on everything else. Since the majority of loan originations which occurred during the so called ‘2020 Stimulus Payment Market’ are the ones going into defaults first, it’s an indication of major worry that not many see yet, especially since the majority of the auto loans provided during that said time period didn’t even come with a thorough income verification check.

Stay tuned for what will come next →