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Three Charts on America’s Not-So-Bubbly Subprime Auto Loans

U.S. consumers cut their collective household debt by $18 billion last quarter. While the nation pulled back on mortgages, borrowers took $30 billion in new auto loans—the biggest increase of any type of debt, according to data from the Federal Reserve Bank of New York (PDF). Although the rise in auto lending could raise a red flag, particularly for loans to subprime borrowers, a deeper look at the data shows that we are far from bubble territory.

Four economists at the New York Fed took a deep dive into auto loans a year ago and found that there wasn’t a “disproportionate or unusual volume of new loans being issued to riskier borrowers.” As we reported last week, it was unlikely that the trend was going to change significantly in the past year. The data reported by the New York Fed isn’t adjusted for inflation. Taking inflation into account, even with the recent growth the new data show the market is still below levels typical before the bubble of the mid-Aughts.