Angela Brown and her husband clean air-conditioning systems at hotels across Texas, relying on cars they bought from subprime auto dealer Tricolor to reach jobs at other ends of the state.
But last October, Tricolor repossessed Brown’s Ford Edge sport-utility vehicle, and in July, it took back her husband’s Ford F-150 pick-up truck. “We’re still trying to play catch-up to this day,” said Brown. “I think it’s just a hard time for everybody right now.”
Earlier this month, Tricolor collapsed amid its own financial distress, sparking concerns about the stability of people on the bottom rung of the US income ladder and whether its failure could be a warning sign for the broader economy. While some data suggests the US economy is continuing to perform well, the financial strains of low-income Americans could be signalling a potential slowdown.
US and Mexico flags remained perched atop cars in the abandoned lot of a Tricolor dealership in Dallas © Shelby Tauber/FT
Subprime auto loans are often regarded as a leading economic indicator, and delinquencies have climbed since the coronavirus pandemic. They rose in August to 9.3 per cent, hovering near the 10 per cent mark that has been surpassed only three times since the 2008 financial crisis, according to Fitch Ratings.
Tricolor’s failure was a “potential bellwether for where the economy is going”, said Brett House, an economics professor at Columbia Business School. “Low-income Americans tend to do absolutely everything possible to remain current on auto payments, even when they face substantial financial distress. Having a car is essential to having work in the US.”
Official indicators have been mixed. Growth in the second quarter bounced back from a 0.2 per cent contraction in the first, but the latest monthly jobs report showed US hiring was nearly flat in August, with just 22,000 new jobs.
Meanwhile, consumer spending has been increasingly driven by the richest Americans. In the second quarter, 49.2 per cent of spending came from the top decile of Americans by income, the highest proportion since the data was first collected in 1989, according to research by Moody’s Analytics chief economist Mark Zandi.
US bank chiefs, who have been generally optimistic this year, have also begun to change their tone in recent weeks. JPMorgan Chase chief executive Jamie Dimon told CNBC earlier this month the economy was “weakening”, and Citigroup chief financial officer Mark Mason warned that he was expecting “to likely have slowing growth” throughout the end of the year and 2026. JPMorgan was one of Tricolor’s biggest lenders, and is now among its more than 25,000 creditors in bankruptcy.
Auto repair and pawn shops line the streets near a Tricolor dealership in Dallas © Shelby Tauber/FT
Tricolor’s failure has also been marked by fraud allegations now under investigation by the US justice department, so its demise may not be a pure reflection of economic conditions. Still, its roughly 100,000 customers across the country have been left to wonder what its end means for their livelihoods.
The company’s car dealerships throughout Texas show signs of the strain. One of its locations on Buckner Boulevard, a busy road on the outskirts of Dallas that stretches between two major highways, has a pawnshop across the street, a few doors away from a used car dealership simply called “500 Down”.
Beyond catering to subprime borrowers, Tricolor also appealed to the Hispanic community specifically, its company name an homage to Mexico’s red, white and green flag. But the demographic has been spending less amid President Donald Trump’s immigration crackdown, raising alarm bells for other large companies that share the same customer base.
Associated British Foods, the UK-based conglomerate, said earlier this month that US sales of its Mazola brand corn oil had been hit by “a lot of fear” in the Hispanic community living in southern states. Brewers Molson Coors and Constellation Brands — which sells Modelo beer in the US — have attributed sales pressure to retrenchment among Hispanic consumers.
Market research group Numerator released a survey earlier this month showing spending growth from Hispanic households had dramatically slowed this year. It fell by 4.8 per cent among “unacculturated” households — which are more likely to be recent immigrants — after rising 4.3 per cent last year.
Many of Tricolor’s locations look like they were evacuated in an emergency. At two sites, the office lights were still on. At the 200,000 sq ft refurbishing centre in Wilmer, Texas, there were papers spread out on the reception desk, packages piled up, a half-empty Gatorade bottle sitting on a table. At another dealership, a Spanish radio station blasted from the outside speaker system. Nobody had bothered to turn it off.
Tricolor’s primary dealerships and a handful of subsidiaries encircle Dallas like a ring, tucked next to the highways that dominate the sprawling metropolis. A car salesman at a rival dealership named Lorenzo, who asked to be identified by his first name only out of privacy concerns, said sales had slowed.
“A lot of people are living check to check,” he said, adding that recent months have felt palpably worse than prior years, with interest rates starting to weigh on customers. “Things are costly [and] people are feeling the crunch.”
Cars on the lot of a Tricolor dealership in the Pleasant Grove neighbourhood of Dallas © Shelby Tauber/FT
The Trump administration’s immigration policies — which include deportations, Immigration and Customs Enforcement raids and an incentive programme for self-deportations — are also beginning to reverberate through the US economy.
Tricolor was known around Texas for Spanish-language advertisements and the Mexican flags perched atop many of the vehicles on its lots. The Trump administration’s immigration crackdown contributed to the company’s troubles, as undocumented immigrants have faced more job uncertainty and general financial insecurity, according to multiple people familiar with the matter.
Asked to comment, ICE said in a statement: “If a business is reliant upon illegal aliens who are breaking federal law, they should look into changing their customer base.”
Some studies have shown large-scale deportations will have a material effect on the economy. Last year a report by the Peterson Institute for International Economics found that real GDP could decline by as much as 7.4 per cent by 2028 from mass deportations. Texas, which had an estimated 2.1mn undocumented workers as of 2023, could be especially impacted.
Tricolor’s collapse adds even more questions for a segment of the population that has already been living precariously.
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Brown, the Tricolor customer whose two cars were repossessed, said her life began to unravel after she bought the vehicles.
Both cars broke down in rapid succession, she said. They wound up in Tricolor’s repair shop for months on end, hindering her ability to work even as she still had to continue paying the pricey twice-monthly loan instalments.
Brown still has one other car purchased from Tricolor, a now-discontinued Ford Taurus from 2015, which she wants to keep making payments on. But she has always paid over the phone. “And now that’s up in the air,” she said. “Every other day I’ve called. And there’s nobody there to answer.”