When even borrowers with strong credit ratings are having their cars repossessed, there's trouble brewing
that were purchased using PPP money as down payments. All of those companies, among other luxury brands, reported record sales in 2021 despite the pandemic.that had been repossessed from a borrower with a pretty good credit score of 700 who was only able to make two payments.
The default rate can’t all be blamed on stimulus, though. Pamela Foohey, a law professor at the Cardozo School of Law at Yeshiva University, warned last year that there wasbrewing before the pandemic hit. Outstanding auto loans were at record levels, and delinquencies were hitting record levels every quarter before 2020.
Just as the bubble was set to burst, though, the government’s pandemic response meant that the bottom didn’t quite fall out of the market. The market, however, looks set to burst yet again, she told Barron’s.. Lopez said, though, that banks won’t just dump repossessed cars onto the market, meaning that values may not crash. The effect of all of this on the wider economy will not be good, he says.
“The idea that the economy is strong? Anyone who is actually doing business sees things are not strong,” said Lopez. “We had a housing bubble in 2008, and now we have an auto bubble.”
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