Equifax Economists: Evidence Does Not Suggest Bubble is Forming in Subprime Auto Market

On August 25th, Equifax  released its monthly Economic Trends Commentary authored by Chief Economist Amy Crews Cutts and Deputy Chief Economist Dennis Carlson, which examines the highly-publicized notion that subprime auto lending is creating "the next bubble."

By examining data aggregated from the credit reports of more than 210 million consumers in the Equifax credit database, the study evaluates whether certain traditional characteristics of a bubble are evident. Through an up-to-date analysis, the current state of subprime automotive lending is assessed and potential economic benefits are explored.

"The lending landscape today is not the same as it was in 2007 - both because lenders generally have a reduced appetite for risk and because regulatory scrutiny has increased," said Dennis Carlson, Deputy Chief Economist, Equifax. "In this Commentary, we discuss why we believe that while the subprime lending segment needs to be monitored carefully - the evidence at this time does not suggest there is a bubble forming."

Using proprietary data from one of the Equifax databases, Cutts and Carlson show that subprime lending in the auto sector has been fairly stable since 2012. They also reveal that originations have been shifting toward the higher end of the subprime credit-score spectrum and that recently opened subprime loans have been performing well year-to-date.


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