Their reason: “Internal and external financial conditions” and a “strategic realignment.”
Indefinite Pause
Car Dealership Guy reports Automotive Credit Corporation Pauses New Originations.
Automotive Credit Corporation (ACC), a 33-year-old regional auto lender specializing in subprime, has abruptly halted all new loan originations “indefinitely” effective immediately, citing “internal and external financial conditions” and strategic changes, according to an internal memo shared with CDG News.
Why it matters: The sudden shutdown of a major auto lender suggests deeper problems in the automotive finance sector that could ripple through dealerships nationwide. When a company suddenly stops lending overnight, it raises questions about market conditions and whether other lenders are quietly tightening up too.
Bottom line: This could be an isolated problem at one lender or a canary in the coal mine for broader auto finance troubles.
The Internal Memo
Troubling Trends in Student Loans, Auto Loans, and Credit Card Late Payments
On August 5, I noted Troubling Trends in Student Loans, Auto Loans, and Credit Card Late Payments
Here are a few charts.
Transition Into Serious Delinquency by Age
Percent of Balance 90+ Days Delinquent
Auto Loan Transition Into Serious Delinquency
Delinquencies for age group 30-39 are nearly as high as during the Great Recession. Age group 18-29 is also hugely struggling.
Those are overall numbers. Subprime is undoubtedly much worse.
Auto Credit Score at Origination
620 is generally considered the boundary between subprime and prime.
The New York Fed commented “The credit scores of newly originated auto loans decreased, as the median score for auto loan originations decreased by 6 points.”
Automotive Credit Corporation sees something. I suspect the lead chart provides the explanation. And it’s worse for subprime.
“Internal and external financial conditions” and a “strategic realignment.”
A triple play.
Write the loans anyway, sell them to Wall Street, they’ll package them as AAA rated and sell them to the pension funds and corporate 401K funds. Nobody will go to prison.
We had a new hire that this was his frrst job in a year and within weeks he goes out and buys no money down used grand am for $25,000 on payments. the next day he comes to work & all passenger side sraped and dented. Following Monday the car is left in the our parking lot front fender grill hood all buckled, broken windshield. But the employee never showed up to work or drive away his car. I wonder what the dealer thinks of No Money Down now?
It is hard to teach people who already know it all.
Automotive Credit Corp is a pretty small company. Maybe 250-300 employees. No financials readily available. Plenty of similar small auto lenders.
Without more solid data, I don’t think this moves the needle.
The source article is 4 days old and no one else seems to be following the story.
It’s about time we started ONLY giving loans (all types) to credit worthy people. If you’re not credit worthy you shoudn’t be given any loan. The people who didn’t pay their student loans and/or rent during covid will find out the hard way when they have to pay cash for everything because they ruined their credit.
I have an 800 score… And I still paid cash for everything.
Which Cartel are you with?
I often wondered why Walter White and Marty Byrde never caught a random Peter Schiff podcast.
That’s why you have an 800 score.
Get a credit card – buy something with it, then immediately pay it off. This will keep your score up.
Don’t buy anything on credit eventually your score gores down because companies can’t gauge your risk.
It’s good to see mortgages have the lowest delinquency rate because the government might sell their ~$500B stake in Fannie and Freddie to investors who want to take them private. Funding the government from those proceeds would help balance the budget and pay off some debt.
Lovely. Can’t wait until Fannie and Freddie screw up AGAIN and the taxpayers get to bail them out AGAIN!
Too bad that $500B will only pay half of one years of the government’s Interest cost.
I accidentally spoke with the low rent auto loan people. They are a car lot now.
Every car dealer went to them for low credit loans.
They stopped doing them a while ago.
This is scary. Almost every new car I looked at has an automatic stop built in. Not to keep it from being stolen but to keep it for the repo guys to arrive.
Samsung supposedly has added such a feature to their tv’s. Can’t pay the buy now pay later no more streaming or gaming.
And new cars don’t have SPARE TIRES. The ” official” line is that the tire and jack saves up to fifty pounds in weight thus mileage.
Fifty pounds? Who is stupid enough to believe that a mid size SUV has a fifty pound tire? Like a big ass truck tire, like a F350 tire.
Also modern hybrids, who’s batteries for the electric engine cost about 3k to replace when they die, now take up the tire space and electrics had no room because of the battery pack.
Damn there are a lot of truly stupid people willing to fall for an obvious lie.
I think tires improved… I haven’t had a blowout in over 30 years.
Blowout no, but I had a flat only 7000 miles ago.
Dealer tires tend to suck getting about 10k mileage. AWD and 4WD require all four tires to be replaced is one goes bad.
It can be patched if the tire people know how.
Cars went from a real spare, to those cheap drive 50 miles temp tires, to now an inflator and can of Fix a flat.
And most buyers don’t pay attention to the mechanical side or the overly complex electrical.
Just the JBL speakers and infotainment.
I saw one complain that she had to buy usb-c cables because the car is usb-c only. What is that like under 10 usd? Or just carry the one from your phone or tablet.
And others complain about the odd shaped cup holders meanwhile you drive a cvt transmission with known failure and shifting problems.
Nobody knows what happens to those metal utility flag markers all over the place until they wind up in a tire.
Yes. The side walls tend to go fast as well. I’ve junked a number of tires with most of the tread still intact.
more nails on the road today than 30 yrs ago
We import 64% of our tires.
If this is an issue you can just by run-flat tires. They cost a little more, but you don’t need either a spare or a tow-truck if they go flat.
Anyway, for most drivers – which means people in urban/suburban areas – you’re normally in cell range for a service truck.
And rural trips there’s nothing stopping you from buying and carrying a spare and a jack if you kick.
ACC is an arm of GM and originates loans on GM vehicles.
From a Search:
Market Share Breakdown:
Captive lenders: (like those owned by automakers) have a large share as well, with Toyota Financial Services being a major player.
Credit unions: also have a strong presence in the used vehicle market.
Finance companies: like RoadLoans (part of Santander) have a smaller but still notable share.
Buy Here, Pay Here dealerships: have the smallest share.
—————————————
This may well be a Canary in a Vehicle Mine.
So far it’s a “small company changes business plan” story which is about as newsworthy as “dog bites man”, which is to say that unless someone calls the company to get some basic quantitative facts, this is a massive nothing burger.
Auto loans and student loans delinquencies will dampen inflation and prohibit RE transactions. The next correction might cleanse Ben’s accumulated distortions, since Oct 2008 first raid on people’s bank account and SS. Thereafter higher productivity and higher real wages will cleanse the accumulated debt.
+ surging student loan delinquencies
Uh oh, watchout, TACO!
The Boogie Man is coming for your greatest economy ever.
Dude, blurry Hockey stick chart will answer everything.
Golden age as far as the eye can see!
That rings a bell somewhere in the back of my head. Maybe an old movie or song.
Not the quote but still fun.
The people who live in a golden age usually go around complaining how yellow everything looks. Randall Jarrell
Posted to Steve Keen’s substack newsletter regarding Money and Macroeconomics from First Principles for Elon Musk and Other Engineers
Thanks for making my point. That is, that the PROBLEM is all about credit-debt, that is, the present monetary paradigm for the creation and distribution of all new money AKA Debt Only, and the SOLUTION is changing economics and the money system by integrating the new paradigm of Strategic Monetary Gifting into the Debt Only MONOPOLY paradigm system…with double entry bookeeping entries of equal debits and credits with a 50% Discount/Rebate policy at retail sale and also the retail point of Finance which is one’s mortgage or other big ticket item payment.
First principles of paradigm change:
1) complete conceptual opposition to the present paradigm,
2) complete inversion of temporal universe realities,
3) new mental realization and
4) the individual effects of the new paradigm are always an aspect or aspects of the natural philosophical concept of grace…like Gifting and the transformation of frustration into gratitude for a 50% gift of price for instance.
https://www.amazon.com/Wisdomics-Gracenomics-New-Monetary-Paradigm-Policies-ebook/dp/B0C49B9PX7/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1552358772&sr=1-1-catcorr
If BLS filter Biden’s noise, rectify its overextended 1.5 job creations, along with a SPX correction, tomorrow 18 to 29 might test gen X in 2009 @5.5% (aqua) and rise to 7%/8%. Millennials 30 to 39 will rise above the boomers of 2009 (brown), they are already there, on the way to 6%/7%.
Have never understood why it makes economic sense to lend to those who don’t qualify for standard loans justifying it by charging much higher interest rates. In the short term, it has and does pay off. However, once the economy slows as along with the increase in job losses, delinquencies and foreclosures result.
They play the numbers game of course: Imagine that the FRONT LOAD of a Loan, mostly going to Interest, is 16% versus a well-qualified buyer and the cost of the loan extension is covered so long as they find and capture (Foreclose and repossessed) and then the car goes into Auction. Quite often that larger Interest Rate plus the Auction fetch means a VERY Small loss.
It works great as long as they can repackage and sell the debt.
long over due for a bear market on main street and wall street. been ancient times in panic of 2007 summer when bear stearns mortgage funds blew up. i remember clearing all my trades with them and sold their common stock and structured notes that summer. by the time st patricks day massacre occurred, in march of 2008 the rest of the story everyone remembers……………i’m hoping for another huge dump.
Trade what’s in front of you, not what’s hiding under the bed
Definition of crowding out – “when government spending fails to increase overall aggregate demand because higher government spending causes an equivalent fall in private sector spending and investment.”
Pushing the debt into the front-end will spark a flight from safety, a run on the US dollar. Hence the decline in the exchange value of the dollar, the rise in gold, bitcoin, etc.
The concept of crowding out is very important to economic theory.
But real GDP growth has been positive annually since COVID (along with a lot of government spending). Where are your sources that private sector investment has decreased by an equivalent percentage?
Given the federal deficit and debt, the 2025 powers that be determined somebody had to take more losses (less benefits, social insurance, same thing), and who would it be? The donor class? No, it would be the poor (subprime), including those suckers who voted for salvation from the guy who would change everything in their favor on “day one.” Their consolation prize: a class of people below them was highlighted and thrown more vividly under the bus. So they got a payoff of what, a few months of feelings of relative dignity, maybe less indignity? I’m not saying all these big picture decisions were unnecessary or wrong. That’s above my pay grade. Some may have been unavoidable in some form, in our plight. I live in austerity with a strong balance sheet. It’s always about to be a storm, in my eyes. I just know those with weak balance sheets are distressed, and they are at the bottom of this society’s capital structure: first losses appear there. But this will also spread distress further, to businesses catering to them.
Subprime loans are highly likely to end in repossession.
This company has come to the conclusion that the cost of repossession and then resale of the vehicle is no longer worth the extra juice on the subprime loan rates.
I wouldn’t be that worried until it starts to move into regular auto loans (the ones given out at dealerships and banks).
Guess I’m getting tired of hearing how great the economy is from the embellisher in chief who will fire anyone who has the guts to call a recession a recession while he is president.
The delinquency rate of change looks pretty grim. Think tariffs will help?
Naphtali, I am guessing that this is retorical statement?