Losses From Auto Loans Are Rising As Bank Of America Goes All In

Good Morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.

1st Gear: Loan Losses Up Because Of Course They Are

Regular Morning Shift readers see it almost every day: new car sales are blowing up! Another record sales month! Everybody’s buying a new car!


Yes, that is a symptom of economic recovery and pent-up demand being met, as well as low interest rates and cheap gasoline. But you didn’t actually think every person in America could magically afford all these new cars, did you? Turns out auto loan losses are on the rise too, reports Reuters:

Industry-wide, banks classified $1.1 billion worth of auto loans as uncollectible in the fourth quarter, according to the Federal Deposit Insurance Corp.

That is up 15 percent from the year-ago period, and up 39 percent since the fourth quarter of 2011. Ultimately, much of that bad debt turns into losses for the banks.

For a graphic showing auto loans that are 30-89 days past due and an auto sales projection, see tmsnrt.rs/24xv9vV

That hasn’t stopped lenders like Bank of America, a noted scum company, from going all in on car loans as hard as they can until this bottoms out:


Bank of America (BAC.N) is making a big push into auto lending just as regulators are sending warning signals, losses from auto loans are rising, and rivals are growing more cautious after years of strong returns.

The bank tapped mortgage executives Matt Vernon and John Schleck to lead the auto lending business last May, saying they would be able to sell auto loans alongside other products such as checking accounts and home equity loans.

This can only end well!

2nd Gear: As Americans Spend More To Buy And Lease Cars

See what I mean? Via The Detroit Free Press:

Americans are leasing more new vehicles than ever and borrowing more than ever when they buy, says Experian Automotive in its quarterly “State of Automotive Financing” report issued today.

More than one-third — 33.6% — of new car and truck transactions in the last three months of 2015 were leases, up from 29.9% a year earlier and more than 10 percentage points higher than the level in the fourth quarter of 2011.

The average new auto loan also reached a record $29,551, up 4% from a year earlier.

I’m going back to bed.

3rd Gear: VW Won’t Dump Lamborghini Or Ducati

The Volkswagen Group is about to be hard up for cash soon, so more than a few observers have wondered whether they plan to dump some of their more superfluous brands acquired at the height of the Ferdinand Piech hubris years. But Audi CEO Rupert Stadler says Lambo and Ducati are sticking around, reports Reuters:

“Those brands belong to Audi and, together with us, have an excellent future,” Stadler said at an earnings press conference on Thursday at the carmaker’s base in Ingolstadt.

Separately, sales chief Dietmar Voggenreiter said he expects “moderate” growth of Audi’s deliveries in China this year, after sales in its largest market slipped 1.4 percent in 2015 to 571,000 vehicles.

4th Gear: ‘Maybe Fiat Chrysler Could Build The Apple Car,’ Sergio Says

Merger-desperate Fiat Chrysler boss Sergio Marchionne wonders, hey, if Apple needs a car, maybe his company could do it! Via Bloomberg:

Given the complexity of auto manufacturing, Apple Inc. would be better served working with an established manufacturer than trying to build a car on its own, and the Italian-American company would be well-suited, according to Marchionne, who says he owns every kind of product Apple makes.

“I would assume that we have the credibility to be one of the players they have looked at,” Marchionne said at the Geneva International Motor Show. “There are parts of us that would be interesting for them.”

Stay thirsty, Sergio.

5th Gear: No Benefit To A Bigger Recall?

As the Takata airbag crisis gets huger and huger, one senator suggested recalling tens of millions more suspect inflators.

But NHTSA thinks they should stick to the “high-risk” vehicles for now, as the scale of such a recall might be too hard to manage, reports Reuters (via Automotive News):

Sen. Bill Nelson of Florida, the top Democrat on the Commerce Committee that is investigating the recalls, said the National Highway Traffic Safety Administration should move faster in addressing the “recall fiasco.”

Nelson on Feb. 23 urged NHTSA to recall all the suspect inflators. His demand came a day after Reuters reported that the agency was examining whether an additional 70 million to 90 million Takata inflators should be recalled because they might endanger drivers.

NHTSA Administrator Mark Rosekind, in a letter on Friday responding to Nelson, said such a massive new recall would “needlessly impose new hardships” on the supply of replacement parts for the 29 million Takata inflators already recalled.

Rosekind said a larger recall also would “increase uncertainty for consumers” and “significantly complicate” the process of supplying replacement parts on high-risk vehicles.

Too big to recall?

Reverse: Maybach Zeppelin


Neutral: Are We Headed For An Auto Loan Crisis?

How bad can this situation get?