BOSTON — There is cause for concern in the auto finance market, but ultimately no “bubble that’s going to burst,” Avi Steiner, senior director and senior credit analyst at JPMorgan Chase & Co., said last week at the AFSA Credit Summit for Fixed Income Investors.
Steiner was referring to recent comments by JPMorgan Chief Executive Jamie Dimon, about the auto finance market being “a bit stressed.”
“My equity research counterparts, my ABS research team, and my securitization team on the auto side all think, although they are concerned with the lending environment, it [Dimon’s prediction] is a little overblown,” Steiner said. “Now, I am going to go with Jamie and say there’s a bit of an issue there.”
Lengthening loan terms, in particular, are a “worrying long-term sign,” and delinquencies are “definitely trending the wrong way,” Steiner said. “It suggests to us that, if you look at the [bank’s auto] data, we’re trending above where we were in the 2005 to 2007 period,” he said. “I think that’s what Jamie ultimately was worried about.”
However, the company’s research teams are less concerned today, due to stable economic conditions, such as a declining unemployment rate, plus low oil prices and interest rates, he added.
Despite Steiner’s call for caution, 30-day delinquencies for auto at JPMorgan subsidiary Chase Auto Finance were at 0.94% in the first quarter, down from 1.35% at yearend 2015.
