Kroll: Auto Loan Debt Returns to 2007 Levels | Auto Finance News | Auto Finance News

Kroll: Auto Loan Debt Returns to 2007 Levels

U.S. auto loan debt grew $31 billion last quarter, accounting for nearly 25% of the overall consumer debt increase in the period, according to a Kroll Bond Ratings report released today. With the third-quarter gain, auto loan debt returned to levels last recorded in 2007, meaning that the sector continues to see strong growth.

Excluding mortgages and home equity loans, auto loans represent the second-largest segment of consumer debt balances, behind student loans. Credit cards, which were the largest non-mortgage debt class through 2009, have since dropped to the No. 3 spot, according to Kroll’s Consumer Credit Update.

Overall, consumer debt levels increased 1.1% ― or $127 billion ― in the third quarter, to $11.3 trillion. Kroll called the gain “the first substantial increase in consumer debt since the third quarter of 2008.”

As of Sept. 30, consumer debt levels were 11.0% below the third-quarter 2008 peak of $12.7 trillion.

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2 thoughts on “Kroll: Auto Loan Debt Returns to 2007 Levels

  1. Yes, we can see this potential train wreck coming, as I’ve written in my occasional column for AFN. But I’m not “in the market” so I was arguing from theory and historical knowledge. It’s good (though sad) to see that the symptoms of excess credit are showing up, even if as yet there are no real signs of illness.

    In the mid-2000s easy monetary policy enabled the bubble; it never made good sense to think that easy monetary policy was a cure for the collapse of the bubble. In 2008, with an election campaign under way, it was the only politically feasible response. Subsequent political stalemate has prevented any other response, except for a modest fiscal package in early 2009 that has already expired. So we’re stuck with lackluster growth, and the possibility that we’ll end up again with big financial imbalances.

    So spot on: creating a new bubble is not a good response to the bursting of a bubble.

    Addendum: Given the exit of lots of players in 2008-9, how many of the staff at those who have reentered the industry are “green”? If those making lending policy don’t remember recent history, because they are new to the game, that makes it all the more likely we’ll see a replay.

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