What if subprime auto delinquencies spiral as used-car prices crash?
Record subprime auto delinquencies on a used-car price crash blow up auto-ABS subordinate tranches — the trade is wider subprime auto-ABS spreads and lower for captive/subprime lenders (Ally, Santander Consumer, Credit Acceptance), with HY the liquid proxy. Rhymes with the 2016-17 subprime auto stress and 2008 — when used-car (Manheim) declines left borrowers underwater and junior ABS took losses. Forward angle: post-COVID auto LTVs and prices are historically stretched, so the deep-subprime tranche math is worse than 2016 even absent recession.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Subprime auto delinquencies hit a record as a used-car price crash leaves millions underwater, blowing up auto-ABS tranches. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.