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Senior Auto Expert: Car Credit Bubble Not A Worry, Sales Could Match 2015 Numbers

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Senior Auto Expert: Car Credit Bubble Not A Worry, Sales Could Match 2015 Numbers

Certain auto loan numbers are stirring fear of a credit bubble. Earlier this month, Benzinga reported on Morgan Stanley analyst Adam Jonas' comment that the auto industry is in its largest loan bubble ever.

AutoTrader senior analyst Michelle Krebs discounted worries of an auto credit bubble in an interview with Benzinga.

"We have a saying in the auto industry: 'You can't drive your house to work in the morning,' which means that people will usually pay their car payment before even their house payment," Krebs said Thursday morning. She noted that car loan delinquencies are generally low.

Related Link: Worried U.S. Auto Sales Have Peaked? You Might Be Overreacting

Credit information service TransUnion predicted the national auto delinquency rate will decline to 1.11 percent by the end of 2016. The average car loan is $28,000, according to Krebs, so adjustments in interest rate or other factors generally only add up to a few dollars here and there each month.

Some indicators of a bubble remain, however. According to Experian data from October 2015, nearly 86 percent of all new cars and 55.5 percent of used cars were purchased with financing in 2015.

The auto industry saw record sales in 2015, shipping 17.4 million vehicles, according to Krebs. Some analysts are predicting another record-setting year, but Krebs was more conservative. She sees sales in the range of 17.4-18 million units.

CNBC auto reporter Phil LeBeau Tweeted on Thursday that a Ford executive said in an earnings call they didn't think there were too many high-risk auto loans.

Ford Motor Company (NYSE: F) shares were down nearly 3 percent after reporting earnings Thursday morning, but began to gain back some ground in the afternoon.

Latest Ratings for F

DateFirmActionFromTo
May 2019UpgradesNeutralBuy
May 2019MaintainsMarket PerformMarket Perform
Apr 2019DowngradesNeutralReduce

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Posted-In: AutoTrader Michelle KrebsAnalyst Color News Exclusives Analyst Ratings Best of Benzinga

 

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