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Texas Could Be The Epicenter Of The Next Subprime Auto Crisis - daily business report - 10-29-2019

Texas Could Be The Epicenter Of The Next Subprime Auto Crisis

In a recent report, we outlined how the largest subprime auto lender, Santander, is currently experiencing one of the most significant accelerations in subprime auto loan delinquencies, not seen since the dark days of 2008. Now, in a separate report via the Federal Reserve Bank of Dallas, there is new evidence that the epicenter of the next auto loan meltdown could start in Texas.  The Texas auto subprime market began experiencing a troughing event in serious auto delinquencies in 2015, with a rapid turn up in 2016. By the end of 2018, the serious auto delinquency rate was at 16.7%, approaching 2010 levels of 18.2%. Despite the "greatest economy ever," the Dallas Fed admits rising wealth inequality could be responsible for the growing delinquencies in Texas. "It's clear something is going on," said Emily Ryder Perlmeter, an adviser for the Dallas Fed and one of the report's authors. "The economy may not be working as well for everyone."Michael Carroll, an economist at the University of North Texas, suggests the report is a clear indication that consumers in easy money times took on too much auto debt. Carroll also said consumer distress in Texas could be a bellwether for the broader economy and a warning sign that the consumer is weakening. Perlmeter said rising auto loan delinquencies across the country is a severe problem, but the meltdown unfolding in Texas is much worse than any other major metropolitan area. The Dallas Morning News noted the average auto loan in the state is $23,500 as of late 2018. Read the entire article