The auto repossession numbers have been climbing in recent months. The numbers are staggering, especially in the subprime market. Subprime repos are now 11% on average across the nation, double the rate in 2020. The more concerning figure is that the rate of prime borrower repossessions are also double the rate of 2020, around 4%. With interest rates moving higher and easing supply dynamics in the chip space, auto dealers will have more trouble selling cars.
During the booming COVID era (2020-2021), Specialty Capital was open to funding auto dealers. The dynamics were very much in favor of doing transactions. Rates were at historic lows and there were supply gaps in new car inventory. Used auto dealers made hand over fist during this time. Banks were also able to underwrite billions of dollars of car loans bringing total auto loan debt to $1.4 trillion. The underwriting standards declined as banks were vying for paper and rates were cheap. LTVs were as high as 140%. Lenders used propped up incomes from pandemic era stimulus money.
Specialty Capital believes that there will be more defaults in the auto loan space. The repossession specialists will be busier than ever and for that reason we remain aggressive on offers to towing companies. Lastly, the repossessions will further allay the supply issue in the used / new car space.
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