Surge in Auto-Loan Delinquencies Is Latest Trouble for the Economy

[babylonsister]

Surge in Auto-Loan Delinquencies Is Latest Trouble for the Economy
By JEFFREY MCCRACKEN and GREGORY ZUCKERMAN
December 6, 2007; Page A1


First came housing loans and the subprime-mortgage crisis.

Now, signs of stress are creeping into another key consumer area: auto loans.

Delinquencies in the auto-loan market are ticking up to their highest level in several years. Lenders are tightening terms in some cases, and interest rates have risen from the rock-bottom levels of a few years ago. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month, according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month.

"The numbers will get worse for auto loans," says Dan Castro of GSC Group, a New York firm that runs debt-related investment funds. "We're starting to see signs of rising losses, and delinquencies are creeping up."

Few in the auto-loan industry see the strain as the kind of disaster-in-the-making that home mortgages have become. Still, there is a connection between the two categories, since the squeeze on some home borrowers may make it harder to carry car loans. The trouble signs in auto loans suggest that the credit woes could be spreading to the broader economy, a development that has been worrying investors and policy makers in Washington.

Other corners of the credit market are also sending troublesome signals. Shares of First Marblehead Corp., which packages student loans into securities, dropped to a two-year low yesterday after an analyst cut his rating on the stock and Moody's Investors Service threatened to downgrade some of its securities, also because of delinquency concerns.

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http://online.wsj.com/article/SB119690536188815285.html?mod=hps_us_whats_news

[susu369]

1. Not to worry

our great "Decider" will handle the problem. Bu$h can say less car owners will make less demand on our dependence on oil.

:sarcasm: