
News Link • Economy - Economics USA
Subprime Auto Loan Delinquencies Hit Record High 6.56 Percent
• Mish TalkKicking the Can
Extensions provide temporary breathing room, but they can come at a steep cost. For example, a six-month extension on a $25,000 loan at 15% APR—not an uncommon scenario in subprime—tacks on over $3,100 in extra interest and extends the debt well beyond its original term. That's why financial analysts often call the approach "extend and pretend"—kicking the can down the road without solving the underlying problem.
Between the lines: Some lenders know the risks but seem willing to take them. Ally and CarMax admitted in recent earnings calls that they're loosening extension policies, making it easier for borrowers to delay payments.