Is subprime lending heading south?

It may not have hit your radar yet, but Wall Street is noticing a trend when it comes to subprime auto loans. According to a story on CNBC earlier this week, negative subprime auto data from CarMax’s recent earnings report is potential bad news for some financial institutions.

Kevin Barker from investment firm Piper Jaffray had this to say in a note to clients on Tuesday in regards the report from Carmax:

“CarMax is the largest used car dealer in the country, we believe these developments indicate we will continue to see more pressure on used car prices in the coming months. The decline in sales from lower tier borrowers (near-prime to subprime) are a clear signal the market recognizes subprime lending may have been overextended. These developments continue to confirm our thesis that lower used car prices and lower auto sales will pressure earnings/revenue for banks most exposed to the auto sector.”

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