The data says it all. According to Euromonitor and JATO, between 2009 and 2016:
- U.S. consumer spending on vehicles grew by 36 percent
- The outstanding balance of consumer auto loans increased by 36 percent
- Disposable income only grew 15 percent
- The outstanding balance of consumer loans as a whole decreased by 7 percent
- The average auto debt per car in circulation rose by 44 percent
Everyone knows that since 2009, auto manufacturers and lenders aggressively pursued unit sales and loan volume. Manufacturers have hit a peak when it comes to providing deep incentives, while lenders loosened credit standards, increased terms, and dove into the deep-subprime space.
Morgan Stanley recently reported that the percentage of deep subprime loans rose from 5.1 percent in 2010 to 32.5 percent in 2017.
Now dealers, manufacturers, and lenders are beginning to see what the other side of this rapid expansion looks like. Sales are plateauing regardless of dealer or manufacturer incentives. Defaults and delinquencies are up, and loan originations are on the decline.