Based on ride-hailing networks and the shift from gas-powered to electric vehicles, ARK believes that the risks to auto loans, the asset-backed securities supporting them, and their underlying collateral are not well understood and could cascade the global auto ecosystem.
The percent of auto loans delinquent by 90 days or more has been rising for almost four years and is approaching levels last seen during the Global Financial Crisis (GFC) in 2009, as shown below. During the GFC, most consumers and businesses prioritized the servicing of auto loans over their mortgages because, in the absence of ride-hailing, they relied on vehicles to keep their jobs and businesses going. Now working from home, they seem to be prioritizing mortgages and home equity (HE) loans over auto and credit card debt.
Interestingly, it appears that the coronavirus crisis also has caused a surge in used car sales as
people opt out of public transportation. ARK believes that this short-term spike in demand is
not the harbinger of a long-term trend, especially now that ridesharing offers an alternative to
car ownership. Soon, autonomous ridesharing should make the negative case for used cars