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 Experience 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.
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