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The JPMorgan Chase CEO says "someone is going to get hurt" as financing for autos has flourished in the U.S.
Jamie Dimon is sounding the alarm on auto loans.
"Auto is clearly a little stretched, in my opinion," the JPMorgan Chase CEO said Thursday morning, speaking at the AllianceBernstein Strategic Decisions Conference in New York. "Someone is going to get hurt. ... We don't do much of that."
But other lenders have.
The average size of new auto loans is rising, as is the average payment size, according to research from Experian released Thursday morning.
In May, the total amount of auto loans cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto sales have hovered around record highs.
At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record.
The Experian research also noted that more subprime borrowers are borrowing for new auto purchases.
"The continued rise in new vehicle costs have kept many consumers exploring options to keep their monthly payments affordable," said Melinda Zabritski, Experian's senior director of automotive finance, in a statement that accompanied Thursday's research. "As long as vehicle prices continue to rise, we can expect leasing rates to grow along with them. However, consumers need to understand the nuances of their lease agreements and make sure that leasing fits their lifestyle."
Not mentioned in the article, but the average loan for a new vehicle is now 68 months as well. 66 months for used vehicles.
Sounds like a lot of people make a lot of bad decisions to me. I dont see a ton of new Mercedes and BMWs on the road, must be a lot of subprime borrowers making up the market here. Does not seem very healthy.
Subprime is actually performing quite well. No big spikes in delinquencies. This is really just inflation at work, and people extending car loan terms longer to keep the payment below the psychological $500 level.
Not mentioned in the article, but the average loan for a new vehicle is now 68 months as well. 66 months for used vehicles.
Sounds like a lot of people make a lot of bad decisions to me. I dont see a ton of new Mercedes and BMWs on the road, must be a lot of subprime borrowers making up the market here. Does not seem very healthy.
I cringe at this thought. My car payment is $0/month.
...Sounds like a lot of people make a lot of bad decisions to me.
I agree completely.
On the busy boulevards near here, I'm amazed at the number of new MBs, Audis, BMWs, Lexuses, Acuras, Porsches, Maseratis, Land Rovers and Jaguars. I usually see at least one Ferrari per day. Of course, Escalades are very popular as well.
Many people are also rolling in negative equity into those car loans as well, making the problem worse.
Only if they plan on dumping the car after 2-3 years. If you buy a car and intend to drive it the next 10+ years, then negative equity, or the number of months of payments doesn't really matter as much. Hopefully you don't run into any situation which forces you to get rid of it early though.
Of course, many people I know seem to think making that final payment on a car means it's time to go buy another one.
I wonder how many people with the $30,000 car loan and the $500 a month car payment are the same people who are whining about how their $30,000 student loan is ruining their life.
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