Losses on subprime auto loans have spiked in the last few months, according to Mizuho. That could spell bad news for US carmakers, consumers, and the economy. The number of Americans who have stopped paying their car loans appears to be increasing – a development that has the potential to send ripple effects through the US economy. Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho’s chief US economist. They jumped to 9.1% in January, up from 7.9% in January 2016. “Recoveries on subprime auto loans also fell to just 34.8%, the worst performance in over seven years,” he said in a note. “It’s getting worse,” Ricchiuto told Business Insider. That could spell bad news. First, the rising losses spell bad news for the US auto industry, according to Ricchiuto, as borrowing costs for consumers to buy cars could increase. Rates are already heading north, with the Federal Reserve expected to hike this week. Libor, a measure of financing costs, is at its highest level since 2015, and the yield on the two-year Treasury note has spiked, doubling in six months. That means financing costs for auto loans would increase, regardless of… Read full this story
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