[tommyjbehnke]

Professor Herbener,

I have a quick question for you regarding the giant automobile bubble we currently have. Obviously, it is a result of credit expansion/artificially low interest rates. But would you say that it is fueled mainly by:

A.) Car companies taking advantage of the low interest rates — investing too much, creating too much, and giving too many “sweet deals” to their customers;

B.) Banks and investment firms, who are more than happy to invest in the subprime auto market and provide cheap loans; or

C.) A mixture of both A and B?

Thanks so much for your thoughts.

[jmherbener]

Auto loan statistics are compiled by Equifax. Here’s a piece on Equifax’s October 2014 report.

http://insight.equifax.com/auto-market-revels-in-record-vehicle-loan-totals-a-breakdown-of-the-recent-national-consumer-credit-trends-report/

It shows that in the fall of 2014 financial institutions had 31.4 million auto loans worth $453 billion and auto companies had 34.1 million auto loans worth $471.2 billion.

Here’s an Equifax report on subprime auto loans.

http://www.equifax.com/assets/corp/subprime_auto_economic_commentary.pdf

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