Low-wage buyers might start defaulting those auto loans

The subprime eco🎐nomy is roaring back, but this time, instead of foreclosures, you’ll see new cars b♒eing towed away from the owner.

That’s because the record US auto sales we saw in 2014 and 2015 were built on no-look, 🐭document-light new car loans, accor𝐆ding to a recent TransUnion report.

A record suꩲrge in defaulted auto loans from New York to North Dakota is a warning that the rising low-wage labor force may be unable to shoulder a middle-class consumer lifestyle, analysts say.

“Even if the US economy has improved and the labor market is actually strong, the theme last year, and into the first two months of 2016, is that the economy is adding more low♐-wage t♏han high-wage jobs,” said Perc Pineda, senior economist at the Credit Union National Association.

“These low-wage jobs,” he added,💝 “are not a good match for whaꦉtever auto loans these buyers have assumed.”

And yet thousands and thousands of these same buyers in the low-wage economy are no꧑w being 𓄧qualified for car loans.

🍌While the New York metro area is not hit as hard as North Dakota, where default rates have jumped 42 per📖cent from last year, from lost fracking jobs, the tristate region has been badly shaken.

The delinquency rate rose 2.7 percent in New York state, 4.1 percent in New Jersey and 4.0 percent in Connecticut during the l💮ast quarter, according to TransUnion data.

Some analysts call it a bubble waiting to burst.

Auto sales to American consumers❀ exceeded $1 trillion last year, setting a record sales pace of nearly 18 milli🦋on vehicles.

All told, 75.6 million US consumers had an auto loan in the last quarter, according to TransUnion. That’s a rise of 7.8 percent from a year earlier, as automakers pulled out the stops with come-ons and incentives to spike sales, from bone-💃shakers to high-end SUVs.

“Nearly 18 million in auto sales last year indicates to me we’re getting close to the top of how far this can go. To keep it at 18 million would require even more leverage,” said Edward Pinto, resident fellow at the American Enterprise Institute. “Once you start having defaults occur quickly, that’s the end of that particu༺lar part of the cycle, potentially.

“That is why you are having defaults going up in this ar⛎ea,” added Pinto, who is an expert on bubbles and a former chie♉f credit officer at Fannie Mae.