• Subprime car loans are huge right now
    15 replies, posted
[URL]http://derekkreindler.kinja.com/how-a-new-generation-of-sub-prime-auto-financing-could-471242681[/URL] <--- Found on Jalopnik [quote] March was the 5th straight month of a SAAR above 15 million vehicles. Industry analysts have explained the strength of the market in a number of ways. The need to replace older vehicles is one (new car sales were hit hard during the recession as consumers held on to their vehicles for longer. [URL="http://www.thetruthaboutcars.com/2013/03/auction-monday-all-hail-mary/"]This also caused used car prices to skyrocket, something TTAC has been documenting[/URL]), while others have cited increasing fleet demand, and the desire to replace vehicles damaged in Hurricane Sandy. But one factor that is just starting to get attention outside of TTAC is sub-prime financing. [B]Sub-prime lending, which involves giving high-interest loans to customers with poor credit scores, is driving the SAAR in a big way, by letting buyers with poor credit purchase new cars. In turn, the sub-prime bubble is being driven by Wall Street, whose clients cannot get enough of financial instruments backed by sub-prime auto loans[/B]. Sub-prime loans, defined as a loan given to anyone with a credit score under 660, are now bigger than ever. In Q2 of 2012, new car sub-prime loans accounted for a quarter of of all loans, while [B]56 percent of used car loans went to sub-prime buyers[/B]. There's even a new category called "deep subprime", for auto loans issued to buyers with credit scores below 600. These loans account for nearly 11 percent of all car loans, despite the fact that a 600 credit score is considered abysmal. [/quote] SAAR - Seasonally Adjusted Annual Rate Read the article, it's quite interesting and very worrying. Basically, car sales are exploding right now, because sales crashed during the recession and people were holding on to their vehicles for longer. Now, people want to replace the cars they put off replacing a few years ago. The problem is, this boom in sales is being driven by a significant amount of subprime lending that almost exactly follows the template that led to the housing crisis. Extremely high-interest loans are being issued to people with shitty credit ratings, then packaged up and sold as securities on Wall Street. And, yes, those securities are all rated as AAA despite being composed of loans to people who probably won't be able to pay them back. The dealers issuing these loans don't give a shit, they either package the loans up and sell them off as securities, or they wait for the customer to default on the loan and simply repo and resell the car. As for Wall Street, they eat these up because the exorbitant interest rates generate higher returns, albeit at greater risks. The Fed has kept interest rates bottomed out for years, so the Wall Street gamblers are going outside the standard bonds and securities and buying up much risker products to have a chance at higher returns. Granted, this probably won't tank the economy because it's tiny potatoes compared to what happened with the housing market. Still, it's pretty discouraging that Wall Street has learned absolutely nothing from the past five years, except that the federal government will always bail them out if they lose their gamble.
When will people learn not to prey on the poor?
Thread is fitting for OP. Ontopic Isin't it the subprime loans that helped with triggering the financial collapse?
[quote=Used Car SAlesman]Granted, this probably won't tank the economy because it's tiny potatoes compared to what happened with the housing market. Still, it's pretty discouraging that Wall Street has learned absolutely nothing from the past five years, except that the federal government will always bail them out if they lose their gamble.[/QUOTE] You've just answered your own statement - Lenders will not lend cautiously if they believe that they will be bailed out. It's the worst type of system, a de-regulated lending market with the knowledge that they cannot fail, nor will they be penalized if they do. Especially considering the banking and automotive industries were both bailed out in the crisis. [editline]a[/editline] I believe it's either one or the other, you have a heavily regulated industry with bailouts or you have de-regulated industry with no bailouts (provided that banks etc. have normal company regulations applied to them) Also this is quite interesting with regards to the banking crisis, [url=http://www.telegraph.co.uk/finance/economics/9979995/KPMG-faces-possible-audit-inquiry-over-HBOS-failure.html]KPMG faces possible audit inquiry over HBOS failure[/url]
Yeah another 2008-2009 please or whenever the last crisis was because of shitty lending practices, I think that I will wait until after this scheme fails then I will buy a car or another motorcycle. Either way the people lose the corporations win and that sucks big time.
[QUOTE=rsa1988;40209666]Yeah another 2008-2009 please or whenever the last crisis was because of shitty lending practices, I think that I will wait until after this scheme fails then I will buy a car or another motorcycle. Either way the people lose the corporations win and that sucks big time.[/QUOTE] Last crisis? We're still deep down in it. This is seriously obnoxious to see no one seems to learn from previous mistakes.
Good job, banks. You fuck up the housing market with sub-prime mortgages, which in turn crashes the entire fucking world economy, then barely wait for the [i]slightest[/i] hint the economy starts recovering and you do it all over again with car loans! Fucking brilliant!
Stop whining your damn communists and learn that subprime loans is just the [B]American Dream![/B] Subprime [I][U]IS[/U][/I] America. I fought the Chinese in pre-French Vietnam to keep America America.
[QUOTE=Glaber;40209314]When will people learn not to prey on the poor?[/QUOTE] When there's consequences for it when it goes tits-up instead of bailouts
[QUOTE=Glaber;40209314]When will people learn not to prey on the poor?[/QUOTE] I've been looking into the crisis more, recently. There's a video of Thomas Sowell saying how the crisis came about because banks were being pushed by Federal Government to lend to the poor, against the banks' own regulations. With consideration to how GM was bailed out and provided that the above is true, it makes me wonder whether a surge in car sales is a result of Federal Government also?
[QUOTE=butt2089;40210257]I've been looking into the crisis more, recently. There's a video of Thomas Sowell saying how the crisis came about because banks were being pushed by Federal Government to lend to the poor, against the banks' own regulations. With consideration to how GM was bailed out and provided that the above is true, it makes me wonder whether a surge in car sales is a result of Federal Government also?[/QUOTE] The banks went way above and beyond any government initiative for helping poorer homebuyers. The government didn't make them issue high-interest loans to people with shit credit who could never pay them back, and the government didn't make people with minimum wage jobs buy $400,000 houses. That was greed and maliciousness from the banks and greed and ignorance from the buyers. Cash for Clunkers, IMO, did play some role in the car lending issue. Armed with the $4500 credit from the government, I'm willing to bet a lot of subprime buyers got talking into spending a LOT more money than they otherwise would have. However, at the time car sales were still in the tank from the recession, and they didn't start to pick up until well after C4C ran it's course. It does still piss me off that a government program like C4C (which I personally disagreed with) was hijacked by greedy Wall Streeters to funnel subprime buyers into predatory loans.
You know what, I wouldn't put it past them. If you find that they are, be prepared to show what you found. Personally I hated C4C because cars that weren't clunkers were trashed. cars that would have otherwise have been resold at more affordable prices.
The problem is two-fold. You have the idiots who don't know how to manage their own money, because they are never taught how. Almost zero education is given to people on finances or the sort. They buy out of their means and destroy any future for themselves. The other HUGE factor is the idiots who lie to these people and say, "Oh you make $500 a month? This loan will only cost you $450 a month! You can easily afford that!" Not explaining that THAT IS ALL THEIR DAMN MONEY. [editline]8th April 2013[/editline] [QUOTE=Glaber;40210533]You know what, I wouldn't put it past them. If you find that they are, be prepared to show what you found. Personally I hated C4C because cars that weren't clunkers were trashed. cars that would have otherwise have been resold at more affordable prices.[/QUOTE] You know why I hated C4C? Because the stupid ass government sucks and can't run shit. It cost them like $25,000 per car to do cash for clunkers...
Not only that but C4C was incredibly bad for the environment. It's far greener to just keep the old, inefficient car in good repair than it is to scrap it and build a brand new one.
[QUOTE=TestECull;40217253]Not only that but C4C was incredibly bad for the environment. It's far greener to just keep the old, inefficient car in good repair than it is to scrap it and build a brand new one.[/QUOTE] It was wasteful to scrap any car from the 80's and up, but anything before that is debatable.
[QUOTE=Zeke129;40210174]When there's consequences for it when it goes tits-up instead of bailouts[/QUOTE] Bailouts are just pretty much telling them "oh it's ok if you fuck up we'll bail you out, you speculate and ruin shit we'll be busy looking elsewhere".
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