Market Overview

Meet The Companies Most Exposed To Subprime Auto Risk

Meet The Companies Most Exposed To Subprime Auto Risk

The latest numbers from Black Book (BB) seem to confirm that the U.S. auto market has peaked.

BB just launched its brand new BB Used Vehicle Retention Index (UVRI), which indicates that used car prices declined by 6.0 percent in 2016. So far in 2017, that trend seems to have continued.

The latest numbers from the National Automobile Dealers Association (NADA) indicate used car prices fell another 7.2 percent year-over-year in February.

According to Height Securities analyst Edwin Groshans, declining auto prices are bad news for subprime auto lenders.

“We expect off-lease volumes to result in above average annual depreciation in 2017 and 2018,” Groshans explains. “The combination of lower used car auction prices and weakening credit quality will manifest in the operations of auto finance companies with subprime lending concentrations.”

Related Link: Fallout Of Record High Gap Between New, Used Car Loans For Auto Lenders

Groshans mentions the following companies as particularly at risk from the decline:

  • Credit Acceptance Corp. (NASDAQ: CACC)
  • Santander Consumer USA Holdings Inc (NYSE: SC)
  • Ally Financial Inc (NYSE: ALLY)
  • Capital One Financial Corp. (NYSE: COF)

Back in February, the Federal Trade Commission requested information from Credit Acceptance Corp related to allegations of potentially abusive debt collection practices.

The total amount of outstanding auto debt in the U.S. now stands above $1 trillion. In 2016, Fitch reported that the number of seriously delinquent subprime auto loans had reached its highest level since 1996.

Latest Ratings for CACC

Jul 2020Janney CapitalUpgradesSellNeutral
Jul 2020Credit SuisseMaintainsUnderperform
Apr 2020JMP SecuritiesMaintainsMarket Underperform

View More Analyst Ratings for CACC
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Related Articles (CACC + SC)

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