A NYTimes investigation has uncovered a new bubble resembling the housing market before the 2008 crash: Subprime auto loans.
People with bad credit or unreliable income are easily getting loans to buy used cars. But these loans come with astronomically-high interest rates, which low-income drivers find difficult to repay.
From the story:
"The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages. A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors. Just as Wall Street stoked the boom in mortgages, some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.
And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans."