Odd Lots Podcast Summary

Episode: Why Americans Are Falling Behind on Auto Loans At Their Highest Level Ever
Air date: December 22, 2025
Hosts: Joe Weisenthal & Tracy Alloway (Bloomberg)
Guest: Ricard Bondabo – EVP, Chief Strategy Officer, Chief Economist at VantageScore

Main Theme & Purpose

This episode examines why auto loan delinquencies in the U.S. have reached historic highs and explores the broader financial health of the American consumer. The hosts and guest delve into how credit-scoring works, what’s driving the recent spike in auto loan and student loan delinquencies, the impact of wealth vs. income, and the nuanced reality of consumer resiliency in a post-pandemic, inflationary environment.

Key Discussion Points & Insights

1. The Confusing State of the U.S. Consumer ([02:13] - [05:48])

• Joe expresses confusion at seeming contradictions in consumer data: weak sentiment, yet continued robust spending; layoffs remain low; markets at all-time highs.
• Both hosts discuss the "K-shaped" economy: higher-income groups continue to spend, offsetting lower spending among less affluent cohorts.
• Tracy points out that the weakest consumer bond vintages are from the 2020-2022 stimulus-era, a period marked by low interest rates and looser lending standards.

2. How Credit Scores Work & Why VantageScore Exists ([05:48] - [11:00])

• Ricard explains that VantageScore was founded by Experian, Equifax, and TransUnion to bring innovation and competition to credit scoring, expanding access to credit.
• Unlike traditional models, VantageScore updates its algorithms regularly to adapt to evolving consumer behavior and employs newer data and methods.
• They are able to score about 33 million more people than traditional models, using additional data sources like utility and rent payments, as well as time-series (trended) data.

3. Predictiveness and Nuance in Scoring ([07:56] - [14:47])

• Credit scores are designed to predict the likelihood of default over the next 24 months—not just to provide a static risk number.
• Ricard stresses they use AI, clustering, and more mathematical nuance to segment and score consumers more accurately.
• Example: VantageScore can score people who have had gaps in their credit history, such as military personnel deployed overseas.

“We rewrite the whole thing each time [we release a new model] so we can come up with the most accurate way … and provide an awful lot of transparency…” — Ricard Bondabo ([11:08])

4. Credit Scores Are Relative, Not Absolute ([17:55] - [20:53])

• Ricard explains that scores are relative to the prevailing economic environment. A 720 score conveys different risk in 2017 vs. 2022 due to systemic changes.
• Lenders must factor in external economic variables—unemployment, wage growth, etc.—to interpret scores adequately and set lending standards.

“A score of 720 in 2017 had a very different characteristic than a score of 720 in 2022.” — Ricard Bondabo ([19:11])

5. The "K-Shaped" Economy: Wealth > Income ([22:39] - [24:10])

• The podcast challenges the assumption that current financial divides are purely about income.
• Bondabo’s data shows homeownership (wealth) is a stronger differentiator for consumer resilience than income level. Home equity provides a critical cushion.
• Those who bought homes before 2020, with low mortgage rates, are advantaged compared to recent buyers facing higher rates.

6. Big Change: Expanding Access to Mortgages ([24:47] - [27:34])

• The FHFA now allows VantageScore for mortgage underwriting (not just FICO), letting millions more Americans be “scorable” for home loans, especially in rural states like West Virginia.

7. Delinquency Trends: From Pandemic Stimulus to Post-Inflation ([28:27] - [32:52])

• During pandemic stimulus, consumer delinquencies plummeted and savings rose across the board.
• As inflation rose, lower-income households were first to see increased delinquencies; by 2023, middle- and high-income groups followed as savings cushions were depleted and costs rose (especially for rent, childcare, and autos).
• Recent data hints at a “silver lining”: delinquencies among higher-income groups are now declining, which bodes well for spending-driven GDP.

“Even though maybe they had more savings, eventually, if your inflows and outflows don’t balance, that cushion gets depleted.” — Ricard Bondabo ([29:19])

8. Holiday Spending and Consumer Indicators ([36:30] - [38:47])

• Black Friday and holiday sales hit records, but Ricard notes it’s hard to disentangle real growth from inflation-driven ticket prices.
• He suggests retailers’ results (from LVMH to Walmart) tell a more nuanced story, reinforcing ongoing divides between economic cohorts.

9. Auto Loan Delinquencies: What’s Different Now? ([40:59] - [46:12])

• Auto delinquencies are now at their highest ever, surpassing previous peaks.
• Causes:
  • Average auto loan balances have grown faster than mortgages over 15 years.
  • Sharp rise in car prices and interest rates post-2020.
  • Insurance and repair costs have climbed, squeezing household budgets.
  • Even “prime” and “near-prime” borrowers are now struggling.
  • Repossession happens more quickly with cars, so borrowers try to hold on until they absolutely can’t.

“Back in 2010, auto had the best performance of any loan … now, the first quarter this year it was the riskiest credit product out there.” — Ricard Bondabo ([42:38])

10. The Limits of Credit File Data & Hidden Leverage ([45:34] - [47:39])

• Many buy-now-pay-later (BNPL) loans and informal borrowing fall outside bureaus’ visibility.
• This shadow lending increases uncertainty about real consumer leverage.
• Emerging models are incorporating bank account and cash flow data for more accurate, holistic credit risk assessment.

11. Student Loan Delinquencies Resuming ([49:24] - [52:11])

• Pre-COVID, student loan delinquencies were 9-11%. As payments resumed after a 5-year pause, delinquencies spiked to over 20%—the highest in recorded history.
• Some improvement has occurred as confusion abated and borrowers caught up, but delinquencies remain elevated.

“[Student loan] delinquency rates … over double what the historical norm was since [restarting].” — Ricard Bondabo ([50:49])

12. The Fragile Consumer: No Immediate Collapse, Lots of Risk ([57:00] - [57:56])

• Ricard and hosts agree: there’s no obvious single shock on the horizon, but cumulative stresses—auto, insurance, student loans, dwindling savings, and high living costs—make many households vulnerable if a new crisis arises.
• Consumer credit fragility is at a multi-year high, even if not yet at the precipice of collapse.

Notable Quotes and Memorable Moments

• On the relativity of credit scores:
  “It’s not an absolute measure of risk. It’s a relative measure … so a score of 720 in one year is not necessarily equivalent in another year.” — Ricard Bondabo ([18:35])

• On the new mortgage rules:
  “Now there’ll be a choice—lenders can choose which score they want to use and they can make their own evaluations about which one performs better.” — Ricard Bondabo ([27:56])

• On the pain points of higher-income groups:
  “It took them longer before it started impacting their delinquencies, but they did start feeling the pain.” — Ricard Bondabo ([29:47])

• Host banter on wealth:
  “Why haven’t you tried just being rich? … Why haven’t you tried buying Nvidia 20 years ago?” — Joe Weisenthal ([53:57])

• On auto loan risk:
  “People don’t willingly just default on these auto loans. … It is a sign that correlates with the fact that more households are struggling to make ends meet.” — Ricard Bondabo ([45:13])

Timestamps for Important Segments

• 02:13 – Opening and the puzzling state of the U.S. consumer
• 05:48 – What is VantageScore? Expanding who gets scored
• 08:01 – Predictive models and their evolution
• 11:00 – Comparing VantageScore and legacy models; scoring 33 million more people
• 17:55 – Adapting models to post-pandemic realities
• 18:35 – Why credit scores are relative; risks are context-dependent
• 22:39 – The K-shaped economy: wealth (homeownership) as the key dividing factor
• 24:47 – New mortgage eligibility rules and their impact
• 28:27 – Delinquencies return as stimulus fades; which cohorts were hit first
• 36:30 – Interpreting holiday spending and the limits of headline numbers
• 40:59 – Rise and causes of auto loan delinquencies
• 45:34 – Challenges with BNPL and hidden leverage
• 47:39 – Auto loan delinquencies hitting new highs
• 49:24 – Student loan repayments and delinquencies spike post-forbearance
• 57:00 – Summary: no single disaster, but accumulated fragility

Tone & Final Thoughts

The conversation is forthright, at times witty, and loaded with technical insight, but always accessible. Joe and Tracy balance curiosity and skepticism, punctuated by Ricard’s expertise and grounded explanations. All three agree: American consumers, especially outside the wealthiest home-owning cohort, face mounting pressures—auto loan defaults, insurance spikes, and resumed student loan payments are canaries in the coal mine for future risk.

Key Takeaway:
The post-pandemic consumer landscape is more “K-shaped” (stratified) than ever, with rising asset values cushioning the wealthy while many others are stretched to their limits by inflation and rising credit costs. Auto loan delinquencies are the current flashpoint, but the real story is a system-wide increase in consumer fragility—one that could tip rapidly should a new external shock arrive.

Listen for:

• Context you won’t find in mainstream delinquency headlines
• A dive into how credit scores actually shape access to the American dream
• Sharp, real-world examples of economic bifurcation

Further Information:

• Guest: Ricard Bondabo – VantageScore’s Credit Insight Page
• Hosts on X: @TheStalwart (Joe), @TracyAlloway
• Bloomberg Odd Lots: Newsletter & Discord info here