An increasing number of Americans have stopped paying their car loans, and Wall Street is starting to worry

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Wall Street is starting to worry about the auto loan market. 

Fitch, Moody's, Morgan Stanley, Mizuho and Evercore ISI have all published research on the market in the past few days, and there's a recurring theme: It's not looking good. There could be wide-ranging consequences, with automakers, the economy, consumers and one corner of the bond market all potentially taking a hit. 

The increased interest in the auto loan market seems to be based on commentary from Ally Financial, weak guidance from Ford, and what Evercore ISI called "a splurge in incentive spending." Here's what you need to know:

• The delinquency rate for subprime auto loans is at the highest level in at least seven years.
• Banks are pulling back, and newer players with looser lending standards are stepping in.
• Used vehicle prices are dropping sharply, as the market is flooded with off-lease vehicles.
• The percentage of trade-ins with negative equity is at an all-time high.
• Asset-backed securities based on auto loans are showing signs of stress.
• A growing proportion of the auto loan ABS market is now made up of "deep subprime" deals.

To the charts:

Fitch: "Deteriorating credit performance will be more acute in the subprime segment."

Fitch

The 60+ day delinquency rate for subprime is at the highest in at least seven years, according to Fitch. 

Previously, Steven Ricchiuto, Mizuho's chief US economist, highlighted a jump in losses on subprime auto loans, moving to 9.1% in January, up from 7.9% in January 2016.  

And in November, the New York Fed's Liberty Street Economics blog looked at the deteriorating performance of subprime auto loans and set off the alarm.

"The data suggest some notable deterioration in the performance of subprime auto loans. This translates into a large number of households, with roughly six million individuals at least ninety days late on their auto loan payments."

Fitch: There has been "an expansion of less-tenured independent auto finance companies that have demonstrated higher-risk appetites and less underwriting discipline."

Fitch

Newer players are emerging, and picking up market share as banks show signs of pulling back. 

"Independent finance companies and credit unions gained the most ground in 2016, ending the year with 20.5% and 25.4% market share, respectively," Fitch said. The increase for finance companies was especially striking, with this group moving from 18.9% to 20.5% in 12 months. 

Fitch highlighted the impact auto finance companies were having on the market: 

"Fitch expects that deteriorating credit performance will be more acute in the subprime segment, driven to some extent by the expansion of less-tenured independent auto finance companies that have demonstrated higher-risk appetites and less underwriting discipline."

Fitch: "Used vehicle prices were down 1.6% sequentially in February, reflecting the sharpest monthly decline for the index since November 2008."

Fitch

Meanwhile, used vehicle values are falling.

Fitch said: 

"NADA’s Used Vehicle Price Index, which measures wholesale prices of used vehicles up to eight years old, declined over 6% in 2016 and was down 8% year over year through February 2017, marking the eighth consecutive monthly decline. Used vehicle prices were down 1.6% sequentially in February, reflecting the sharpest monthly decline for the index since November 2008 and a seasonal anomaly for February."

 

See the rest of the story at Business Insider