Why America's Auto Debt Boom Fuels Bubble Talk: QuickTake Q&A

Since the auto industry’s near-death experience, sales have come roaring back -- last year, a record 17.55 million vehicles moved off U.S. dealer lots. A secret ingredient? Consumer debt, and plenty of it. But things are starting to look a little trickier, as passenger car sales are dropping, overall vehicle sales have plateaued and the Federal Reserve has started to raise borrowing costs. Add to that rising default rates and faster depreciation of used car values, and there’s new anxiety simmering over the state of the U.S. auto finance market. Is there an auto loan bubble? Not one the size of the mortgage crisis by any means, but plenty of borrowers and some lenders may still be cruising for a bruising.

According to the Federal Reserve Bank of New York, about $1.16 trillion. The value of U.S. auto loans in the fourth quarter reached about 9.2 percent of all household debt, the highest share in data going back more than a decade.