The Used Car Market Is Imploding
Huge bankruptcies for used car firms have exposed Wall Street’s entanglement with the sector. Far from derisking after the Great Recession, banks rebuilt the economy on obscure financial intermediaries that are now sinking.
Tricolor Holdings, a large subprime auto lender and used car dealer, has filed for bankruptcy. (Ash Ponders / Bloomberg via Getty Images)
What’s going on with the used car market? To answer this question, we first need to know that it’s about more than secondhand motors.
Tricolor Holdings, a large subprime auto lender and used car dealer, filed for Chapter 7 bankruptcy on September 10. First Brands, a major auto parts supplier, followed suit on September 29, filing for Chapter 11 bankruptcy.
These firms’ financial intertwinement with Wall Street is exposing something structural, beyond the decline of two companies. UBS holds over $500 million in debt exposure to First Brands, while investment bank Jefferies last week revealed its $715 million involvement with the company’s invoice-financing scheme. JP Morgan, BlackRock, and Fifth Third Bank all stand to lose hundreds of millions in the collapse of Tricolor, a company once hailed as a progressive, ESG-certified (environmental, social, and governance) investment.
This article is for subscribers only. Please login or subscribe to access our full archives and beautiful print and digital magazine starting at just $3 a month.