View Full Version : The subprime auto loan crisis?
I don't know - this isn't something that seems to be brought up on the evening news. So, possibly more media hyperbole?
"A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide."
http://www.msn.com/en-us/money/markets/subprime-strikes-again-auto-defaults-are-booming/ar-BBEzOz7?li=AA4Zjn&ocid=spartandhp
Is this really a thing? Have these people never been around a military or college town? This happens all. The. Time. So yeah, hyperbole.
FromMyColdDeadHand
07-17-17, 15:18
The market for cars can clear itself a lot faster than the realestate market. As for the losses on the financial side, I just see enough capital leveraged to be a big enough issue. I keep waiting for interest rates to rise, and keep waiting.
It won't let me copy/paste but I call BS on the second paragraph after the graph. ..... People being lent money without income verification.....
I was in this business for a long time. While there certainly are good people who unfortunately fall on hard times, the overwhelming majority are people who just don't give a F. It's more like "how can I pay my monthly payment when I just put in a $500 stereo system and $8k rims!" Or simply cry about car payment when they always have the brand name top of the line phones and $100 sneakers.
When I ran credit reports I'd mostly see collections for other cars, collections for 7 credit cards with each being between $200 and $1000. The only collections I overlooked we're medical. But overall people didn't care, didn't prioritize. They just bought the next cool thing
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hotrodder636
07-17-17, 17:10
I was a Command Financial Specialist when I was stationed in Charleston...I saw this all the time. I also had to sit young sailors down and explain to them that when you far outspend what you make you get into serious debt. For a lot of these kids it was the first time they ever had any money so they had no idea how to handle it. Most bought cars they couldn't actually afford.
Is this really a thing? Have these people never been around a military or college town? This happens all. The. Time. So yeah, hyperbole.
I spent about 7 years selling cars for a living. All I have to say is this, the majority of car buyers are payment buyers. Very, very few pay cash. If the payment looks good, let's do it! They don't give a damn about the negative equity being rolled from car to car until eventually the dealer and financing company can't make it happen and they are stuck. Most I dealt with in that position never wanted to put any cash down either, just roll it all over.
Any "bubble" in the auto industry will quickly go away as the average buyer moves from one car to another every 3-4 years. Yes, there are outliers on each side of the curve, but 3-4 years is the average.
Confused. I'm supposed to feel sorry for guys who buy above their budget and get their cars repossessed? Or for banks that don't do their due diligence when it comes to who they lend $$ to? Sorry, I'm too old school. Let the bank go bankrupt and if there is a need for more lenders the market will adapt to one less lender. Buy too much car and loose it, go to Walmart and buy a bike to get to work. Harsh lesson, but wanna bet it won't be forgotten.
I've often wondered how much effect on pricing these sheister lenders have. Would Chrysler be charging $30k for a car if banks actually vetted lenders correctly or would prices mysteriously drop?
FromMyColdDeadHand
07-17-17, 17:40
If anything, it might mean some good deals on used cars.
I spent about 7 years selling cars for a living. All I have to say is this, the majority of car buyers are payment buyers. Very, very few pay cash. If the payment looks good, let's do it! They don't give a damn about the negative equity being rolled from car to car .
YES!!!!!!
I had a guy come in who owned $40k on his Scion tC. This was back in 2009-12 time frame. He kept rolling over payments from car to car and he came in looking to get out of that. Unfortunately the only options were either suck it up and pay it off....... eventually. Or roll over again, which he couldn't due to horrible credit and owing 4x what the car was worth. No one would take it in trade
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If anything, it might mean some good deals on used cars.
It doesn't. Banks know what those cars are worth and what they need for them. They want to recoup as much as possible. Not to say that deals don't pop up but generally they don't
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Question for the car sales guys: My buddy recently bought a dodge ram, loaded, with less than 10,000 miles on it. Someone knew he was looking and told him when the guy traded it in.
Story was that every 4 months this guy trades trucks at this dealership. Is there anyway that works without losing your rear?
Averageman
07-17-17, 19:04
The way that works is someone is BS'ing.
The Truck was repo'ed.
The way that works is someone is BS'ing.
The Truck was repo'ed.
I don't think that is the case. My friend was told when the guy would be picking up his newest truck and bringing in the truck my friend subsequently bought.
I thought it sounded as if the dealership liked having low-mileage current year trucks to sell as used, but couldn't figure out how the guy trading wasn't losing his rear.
Averageman
07-17-17, 19:29
I don't think that is the case. My friend was told when the guy would be picking up his newest truck and bringing in the truck my friend subsequently bought.
I thought it sounded as if the dealership liked having low-mileage current year trucks to sell as used, but couldn't figure out how the guy trading wasn't losing his rear.
As a guy who used to buy a new Mustang GT every two years, I don't see how he isn't losing his butt on those deals.
As a guy who used to buy a new Mustang GT every two years, I don't see how he isn't losing his butt on those deals.
I don't either, that is why I asked one of the car guys the question. Could be the guy doesn't care. I do know my buddy is happy with the deal on the truck he got.
I just think new car prices are insane. I got a new 4X4 Tahoe at work this year. It's pretty nice and I thought maybe I should get one to replace my 02 4Runner to tow the boat with. The msrp on a base model 4X4 LS is $51,510. That's the cheapest 4X4 Tahoe you can get? Yeah, call me when they're willing to take about $12K off that. BTW, a Premier before adding any options is $66K, for a Chevy SUV. No thanks. :(
Averageman
07-18-17, 04:51
I'm just guessing that a lot of people go in to the dealership without a clue, make an emotional purchase and then reality hits.
Maintenance, insurance and day to day life make that car purchase a stone around their necks.
The vehicle goes back before the first oil change.
The Dealership writes off the depreciation the now used car is financed at a higher rate to the next clueless purchaser or someone works out their own financing and walks away with a vehicle that is a good deal cheaper than new.
That seems to be the norm here.
I don't either, that is why I asked one of the car guys the question. Could be the guy doesn't care. I do know my buddy is happy with the deal on the truck he got.
Sounds like a program car...rental agency or something similar. Mileage is the determining factor, not age. Or at least that's the way it was in the 90's when I was in that business.
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Question for the car sales guys: My buddy recently bought a dodge ram, loaded, with less than 10,000 miles on it. Someone knew he was looking and told him when the guy traded it in.
Story was that every 4 months this guy trades trucks at this dealership. Is there anyway that works without losing your rear?
Only way that works is if the guy payed cash. If he brought it back on a finance/lease it's a repo. If he's not getting repo'd every 4 months he's paying cash AND he's loosing big big...HUGE! New car drops in value soon as you pull it off the lot. Dealerships will screw him over for the trade in value because they'll need to make a profit too. There is no way this is happening unless this dealership found the richest retard in the world
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I'm just guessing that a lot of people go in to the dealership without a clue, make an emotional purchase and then reality hits.
Maintenance, insurance and day to day life make that car purchase a stone around their necks.
The vehicle goes back before the first oil change.
The Dealership writes off the depreciation the now used car is financed at a higher rate to the next clueless purchaser or someone works out their own financing and walks away with a vehicle that is a good deal cheaper than new.
That seems to be the norm here.
Yes and no. For new cars dealerships don't write anything off. Once they sell (assuming finance or lease) they're done with the car. It's now owned by the bank. If payment is stopped bank repos the car and sends to the auction. Occasionally a buyer might realize they're in over their heads and bring the car back to the dealer. In which case the dealer will contact the bank and have them take the car.
Once the dealer sells the car he gets his money from the bank and the bank gets the title. That it! They might have an arrangement where the dealer buys the banks cars back but 99.9% of all cars go directly to auction
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Averageman
07-18-17, 05:52
There is an amazing glut of nearly new used cars and trucks here, I assumed that they were coming back to the dealership.
Thanks for educating me on that.
Cars are a lot more liquid, and disposable than homes. However, I see A LOT of $100K cars around her. A LOT. I can't imagine paying that kind of money for a car, and I suspect many don't care about the sticker. Like others have said, many just buy on monthly payment. WRONG. Dealers just want to sell cars any way they can.
FromMyColdDeadHand
07-18-17, 08:32
I just think new car prices are insane. I got a new 4X4 Tahoe at work this year. It's pretty nice and I thought maybe I should get one to replace my 02 4Runner to tow the boat with. The msrp on a base model 4X4 LS is $51,510. That's the cheapest 4X4 Tahoe you can get? Yeah, call me when they're willing to take about $12K off that. BTW, a Premier before adding any options is $66K, for a Chevy SUV. No thanks. :(
GM SUVs are crazy, especially the Full Size Tahoe/Suburban/Escalades. Especially if you get anything worthwhile on them, The only thing crazier than their sticker prices is the resale after a couple of years being so low. I buy 2-3 year old Escalades from elderly drivers with low miles. Near half price isn't a stretch. It's funny how big American SUVs don't really get that much scrutiny, but a $70-100 foreign car does. Interestingly, here in CO, the families that are going up and down the mountain most weekends for skiing pretty much have Suburbans- and they run them 5-7 years.
There is an amazing glut of nearly new used cars and trucks here, I assumed that they were coming back to the dealership.
Thanks for educating me on that.
What your seeing is off lease cars bought at auctions. A certain percentage are clean trade ins that the dealer kept. Most money to be made on cars are on used cars. Everyone knows the sticker price of new cars and you know you can bargain a little. Used cars is where the money is at. You don't know how much the dealer payed and while you may have slightly more room to negotiate the dealer can make a killing.
Example
I drive a 2010 Corolla. It was my sister's lease. At the end of the lease she had the option to buy it out. She didn't want to but i did since my car was dying (300k miles... transmission starting to slip...not worth fixing). The buy out for a 4 year old car with 26k miles was $12,500. While waiting I walked the lot and they had a 2001 Corolla with a 100k for $12,000. That's $500 less then my car, 9 years older and 75k more miles. They'll sell it cheaper if you negotiate. Maybe knock off $2 or $3 K if you have cash in hand but they probably paid $2 or $3k to begin with. However if you have bad credit and financing that car expect your final price......when all is said and done to be around $20k or more
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I have run my last 3 cars (between wife and I) to 10 years. Would have run them longer, but the maintenance costs were mounting, so they had to go.
Prices for cars are set by factory cost, AND what the market will bare. With people being stupid about payments and banks being stupid about lending that second part of the equation gets skewed pretty harshly. This is why folks get hosed paying $50k for an SUV worth maybe $30K at best.
I just think new car prices are insane. I got a new 4X4 Tahoe at work this year. It's pretty nice and I thought maybe I should get one to replace my 02 4Runner to tow the boat with. The msrp on a base model 4X4 LS is $51,510. That's the cheapest 4X4 Tahoe you can get? Yeah, call me when they're willing to take about $12K off that. BTW, a Premier before adding any options is $66K, for a Chevy SUV. No thanks.
Yes it is ridiculous these days. SUVS/Trucks costing up to $60k for the premium line. When you can buy a lightly used truck (Tundra, F150, etc) for less than half that.
When did vehicles get so expensive? Its a terrible investment (if that even makes sense). Put your $60k on this asset and it will be worth 50% in 4years!! Suckers...
Question for the car sales guys: My buddy recently bought a dodge ram, loaded, with less than 10,000 miles on it. Someone knew he was looking and told him when the guy traded it in.
Story was that every 4 months this guy trades trucks at this dealership. Is there anyway that works without losing your rear?
Friend of mine does this with VW's because he's obsessed with them. He buys a certain model then a few months later trades it in for a nicer model. He must've done this like 3 times in one year. He is upside down on his payments but doesn't really care. He owns like 4 VW vehicles in his family. The dealer must love him...
People being lent money without income verification.....
I never got asked for income verification for the last two vehicles I purchased. My credit is decent though...
Friend of mine does this with VW's because he's obsessed with them. He buys a certain model then a few months later trades it in for a nicer model. He must've done this like 3 times in one year. He is upside down on his payments but doesn't really care. He owns like 4 VW vehicles in his family. The dealer must love him...
I'll be seeing my friend after our group's summer hiatus is over and see if I can get to the bottom.
My grandfather liked driving new cars, so bought a new one every year. He'd been going to the same local dealership for years, originally buying from a friend, then the salesman his friend handed him off to when the friend retired. Every now and again they would call him and ask if he was ready to trade as they had someone looking for a truck like he was currently driving. Granddad was shrewd enough I don't think he was getting boned. I figured the salesman was getting base commission selling him the new truck as cheap as he could and then making he real money on the used truck sale.
I'm a little surprised that we haven't seen Hyundai and Kia pickup trucks by now.
I'm a little surprised that we haven't seen Hyundai and Kia pickup trucks by now.
You keep that mess to yourself! Don't you put that bad juju on us
I'm a little surprised that we haven't seen Hyundai and Kia pickup trucks by now.
You keep that mess to yourself! Don't you put that bad juju on us
Won't happen. That market is too crowded for it to be profitable for them. Remember the Mazda B2000 (Ford Ranger)? It died before the actual Ford Ranger died. Same with the Dodge Dakota/ Mitsubishi Raider. Isuzu Hombre, anyone? Ford is supposedly bringing back the Ranger but we've been hearing that since they stopped production in 09.
Why doesn't Toyota make a 2500/3500 Tundra? It's not that they can't it's that the big 3 have that niche market locked up so it would take a few years before Toyota made a profit. Makes more sense to just keep making regular Tundras.
I never got asked for income verification for the last two vehicles I purchased. My credit is decent though...
Same for me. Our credit is stellar. We only buy used now. My wife needs mini-vans for her side business and for our main business. I recently purchased a 2015 Chrysler T&C with 20,000 miles on it from a local chain used car outfit for $18K, it has everything but leather. The sales guy turned out to be a good friend of one of my biggest customers. He was quite frank that they paid $16K for the car from the original purchaser. In the glove box, folded up in the owner's manual was the original buyer's paper work. He paid $36K for the car at the end of 2015. In 26 months and only 20K miles he lost $18K.
We drive them till they drop, my truck is a 2006. The $2400 worth of injectors is less than 4mths of payments. I have the blessing, though, that I can do my own work.
I picked this book up sometime around 1978. I had too much "stuff" then (and still do) but it's kept me from making a complete fool of myself.
https://www.amazon.com/Less-More-Anthology-Ancient-Simplicity/product-reviews/089281554X/ref=cm_cr_dp_d_show_all_btm?ie=UTF8&reviewerType=avp_only_reviews&sortBy=recent
When did vehicles get so expensive? Its a terrible investment (if that even makes sense). Put your $60k on this asset and it will be worth 50% in 4years!! Suckers...
...
Works because of the cool factor. How people see themselves. Got a coworker that judges car reliability by how many gadgets it has. Show him a older car that's bullet proof and it's a P.O.S because it doesn't have all those gizmos and a big screen. He car can spend half it's life on a flatbed and he'll still think it's better
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I am in utter disbelief of what people pay for new vehicles!!! $90K for a new land cruiser?!?! $40K for a Honda Pilot!?!?
People are retarded. Especially with finances.
The only item one should amotorize is a house/property. Everything else should be saved up for and bought with cash.
People are so backwards in their finances. No savings, all debt, extravagant toys, cars, vacations, dinner out, Starbucks every day and expensive property's they can't afford- living paycheck to paycheck. Little to no investments.
It's pathetic.
People need a dose of reality big time. This countries economy is all smoke and mirrors. The piper will need to be paid one day.
FromMyColdDeadHand
07-19-17, 10:03
People need a dose of reality big time. This countries economy is all smoke and mirrors. The piper will need to be paid one day.
The people that saved will be the ones to have to pay. You can't pay if you have nothing.
I know the story is that Wall Street took advantage of home buyers in the 2000s, but there were a lot of a-holes with leased cars, balloon loans and on multiple houses. Bubble pops and they walk away. It's been 10 years, so all that could be off your credit record by now, right?
You are talking about planning and stability from people that don't want that since it would preclude them from 'living the life'. They get the benefits from the churn while other people can hit their quarterly numbers.
Which guys went to jail after the GFC? Write a bad check and you go to jail. Write a bad economy and......
I am in utter disbelief of what people pay for new vehicles!!! $90K for a new land cruiser?!?! $40K for a Honda Pilot!?!?
People are retarded. Especially with finances.
The only item one should amotorize is a house/property. Everything else should be saved up for and bought with cash.
People are so backwards in their finances. No savings, all debt, extravagant toys, cars, vacations, dinner out, Starbucks every day and expensive property's they can't afford- living paycheck to paycheck. Little to no investments.
It's pathetic.
People need a dose of reality big time. This countries economy is all smoke and mirrors. The piper will need to be paid one day.
While I am not a big spender, I will spend some money on play. My wife? Fuhhgetaboutit. She can squeeze a penny into making change.
We have no mortgage, both our (older) vans are paid off, and we have been sitting pretty. NOW....facing a $16K septic repair and 4 kids needing orthodontics....but because of our lifestyle, we can make it happen and not feel the pinch too bad....
GM SUVs are crazy, especially the Full Size Tahoe/Suburban/Escalades. Especially if you get anything worthwhile on them, The only thing crazier than their sticker prices is the resale after a couple of years being so low. I buy 2-3 year old Escalades from elderly drivers with low miles. Near half price isn't a stretch. It's funny how big American SUVs don't really get that much scrutiny, but a $70-100 foreign car does. Interestingly, here in CO, the families that are going up and down the mountain most weekends for skiing pretty much have Suburbans- and they run them 5-7 years.
Yep, the one I spec'd out was an LT in red with the luxury package (to get added safety options) and just a couple of other options (tow package, rubber mats and cargo area cover) and it was $35 shy of $60K. Even if I traded in my GS460, the 4Runner AND put 10% cash down, the payment for 60 months would still be over $500! :(
Works because of the cool factor. How people see themselves. Got a coworker that judges car reliability by how many gadgets it has. Show him a older car that's bullet proof and it's a P.O.S because it doesn't have all those gizmos and a big screen. He car can spend half it's life on a flatbed and he'll still think it's better
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The one thing I like about the newer cars is the multimedia integration and all the new safety features. When a hit & run driver totaled my wife's 2010 Lexus (one frigging week after it was paid off!), I got her a 2016 AWD with every safety option available. In it she can literally do everything from the steering wheel so she never has to take her eyes off the road. It's kind of amazing that she can have the car read her a text and take dictation for a reply, all while it alerts her to cars in her blind spots and automatically adjusts speed up or down based on traffic, even emergency braking if necessary. :cool:
https://farm5.staticflickr.com/4305/35218316793_4a4204da55_k.jpg
That car is $350 a month for 60 months at 1.9%. I have some hard and fast rules on cars. Never finance for more than 60 months. Never finance with a balloon payment. Never finance over 5% APR and never pay more than $500 per month. I never tell a salesman what I'm willing to pay per month because that just isn't important in the deal process (to me). What am I getting, what's the total cost and how much will it be worth when it's paid off. If those numbers don't all add up, then I'm not a buyer.
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