General Motors of Canada President Kevin Williams says subprime loans could potentially crush the auto industry in the same way the loans did the housing industry.
Williams told The Globe and Mail that record Canadian auto sales are attributed to cheap credit loans. Some auto companies are now offering eight-year, interest-free loans — which could contribute to an auto bubble.
Canadians are on pace to drive more than 1.73 million new vehicles off dealers’ lots this year, breaking the record of 1.703 million, but that’s a higher level than economic indicators suggest sales should be, Kevin Williams [said] Monday.
“Macroeconomically, there’s some reason for optimism [but] nobody in the industry had the industry pegged at this number,” Williams told the paper. “Nobody had the industry running this high.”
General Motors has been seen as using subprime loans and easy credit to sell vehicles. Nearly 90 percent of loans issued by GM Financial were subprime (via the Free Beacon).
GMF has the riskiest lending portfolio of any major car company: 96 percent of its customers have credit scores below 660. GM’s lending habits parallel those in the housing market leading up to the 2008 crash…GM finished the year with 8.5 percent of loans in delinquency, the highest rate since 2010 and larger than the delinquency rates at Ford, Toyota, and Honda combined.
GM Canada also subprime loans to drive sales, but Williams said they would aim to do less of that because of auto bubble concerns.