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I think there's a lot of bad auto loans out there. I just bought a new vehicle, and when applying for the loan I couldn't fill out half of the required informat

I think there's a lot of bad auto loans out there. I just bought a new vehicle, and when applying for the loan I couldn't fill out half of the required information (I didn't have it readily at hand). The business office person just kept saying "that's OK, just skip that part." All in all they had barely enough information to let me prove I was who said I was, much less that I could repay the loan. This behavior reminded me a lot of what I heard up the mortgage bubble, where there was basically free money floating around.

nicholas73 10y ago
It's personally weird to me that auto loans can be a serious bubble, since I would not feel comfortable buying a car unless I have 10x the sticker price in spare cash, or free cash flow that covers it. Seriously, since it's just a depreciating asset with maintenance liabilities.
- thesagan 10y ago
  On the lender side: I wonder if somehow auto loans are packaged and resold like some other loans, thereby hiding/moving the risk away from the originating lender and into more unsuspecting hands? Not sure how that might work. If it does get repackaged and resold, that may explain some of the reckless lending, if that can be said to exist.
  - masonhensley 10y ago
    They are - https://www.bloomberg.com/news/articles/2016-03-21/this-is-what-s-going-on-beneath-the-subprime-auto-loan-turmoil https://www.bloomberg.com/news/articles/2016-03-21/this-is-w...
    - thesagan 10y ago
      Thanks for the link! Sounds like at least one rating agency has some concern.
- bdcravens 10y ago
  I'm sure you know you are the exception. About 85% of all new vehicles are purchased on credit; the US is approaching $1T in auto loan debt.
  - stephancoral 10y ago
    1.1 trillion, a number that actually surprised me. According to this article, auto loans are "the second-fastest growing consumer debt market" http://www.huffingtonpost.com/allan-smith/the-us-auto-loan-debt-mar_b_11911206.html http://www.huffingtonpost.com/allan-smith/the-us-auto-loan-d...
- kylehotchkiss 10y ago
  There's a lot of places in USA where holding a job is entirely dependent on reliable vehicle. What can you buy, short of some houses, that isn't a deprecating asset?
  - ericzawo 10y ago
    Do some research and you can get yourself a really nice watch for a grand that will almost certainly appreciate. :)
    - Inconel 10y ago
      Is this really the case? Watches and small mechanical things are an interest of mine so I watch the market pretty carefully but I can't readily think of any $1k and under watches that appreciate. New watches in that price range will be very unlikely to appreciate, even in the high end segment appreciation is unlikely outside of maybe Rolex or some low production pieces, but those are all significantly over $1k. Prices have gotten pretty high in the vintage market as well, and that is fraught with risk since fakes and partially original watches are so common.
- deleted 10y ago
  [deleted]
kylehotchkiss 10y ago
It's pretty easy to repo a car all around the country if you don't pay your bill. Add in the fact that most new cars sell with GPS transmitters built in and many car loans are provided by the car company themselves and you've got yourself a quick way to recover losses. It's harder for a bank to evict a tenant of a mortgage, harder for a bank to get money from a graduate who is buried in debt, harder for a credit card company to recover from people who aren't paying either. The funniest thing is how much cheaper new car loans are compared to used car loans.
- rorykoehler 10y ago
  What use is a recovery if liquidating it will get only a fraction of the loan's value back?
  - charlesdm 10y ago
    I'm assuming they don't give you a loan for the entire amount, i.e. just 70% of the value?
    - baldeagle 10y ago
      Throw in a prior car not paid off, paint/tire/oil protection and an additional warranty - it isn't hard to get up to or over 110% of the car's value.
  - kylehotchkiss 10y ago
    If your credit score is bad, you are probably getting quoted a 15-25% interest rate (my first quoted interest rate was 25% at carmax when I first started working). They can recover depreciation pretty quickly in that case.

nicholas73 10y ago

It's personally weird to me that auto loans can be a serious bubble, since I would not feel comfortable buying a car unless I have 10x the sticker price in spare cash, or free cash flow that covers it. Seriously, since it's just a depreciating asset with maintenance liabilities.

thesagan 10y ago
On the lender side: I wonder if somehow auto loans are packaged and resold like some other loans, thereby hiding/moving the risk away from the originating lender and into more unsuspecting hands? Not sure how that might work. If it does get repackaged and resold, that may explain some of the reckless lending, if that can be said to exist.
- masonhensley 10y ago
  They are - https://www.bloomberg.com/news/articles/2016-03-21/this-is-what-s-going-on-beneath-the-subprime-auto-loan-turmoil https://www.bloomberg.com/news/articles/2016-03-21/this-is-w...
  - thesagan 10y ago
    Thanks for the link! Sounds like at least one rating agency has some concern.
bdcravens 10y ago
I'm sure you know you are the exception. About 85% of all new vehicles are purchased on credit; the US is approaching $1T in auto loan debt.
- stephancoral 10y ago
  1.1 trillion, a number that actually surprised me. According to this article, auto loans are "the second-fastest growing consumer debt market" http://www.huffingtonpost.com/allan-smith/the-us-auto-loan-debt-mar_b_11911206.html http://www.huffingtonpost.com/allan-smith/the-us-auto-loan-d...
kylehotchkiss 10y ago
There's a lot of places in USA where holding a job is entirely dependent on reliable vehicle. What can you buy, short of some houses, that isn't a deprecating asset?
- ericzawo 10y ago
  Do some research and you can get yourself a really nice watch for a grand that will almost certainly appreciate. :)
  - Inconel 10y ago
    Is this really the case? Watches and small mechanical things are an interest of mine so I watch the market pretty carefully but I can't readily think of any $1k and under watches that appreciate. New watches in that price range will be very unlikely to appreciate, even in the high end segment appreciation is unlikely outside of maybe Rolex or some low production pieces, but those are all significantly over $1k. Prices have gotten pretty high in the vintage market as well, and that is fraught with risk since fakes and partially original watches are so common.
deleted 10y ago
[deleted]

kylehotchkiss 10y ago

It's pretty easy to repo a car all around the country if you don't pay your bill. Add in the fact that most new cars sell with GPS transmitters built in and many car loans are provided by the car company themselves and you've got yourself a quick way to recover losses. It's harder for a bank to evict a tenant of a mortgage, harder for a bank to get money from a graduate who is buried in debt, harder for a credit card company to recover from people who aren't paying either. The funniest thing is how much cheaper new car loans are compared to used car loans.

rorykoehler 10y ago
What use is a recovery if liquidating it will get only a fraction of the loan's value back?
- charlesdm 10y ago
  I'm assuming they don't give you a loan for the entire amount, i.e. just 70% of the value?
  - baldeagle 10y ago
    Throw in a prior car not paid off, paint/tire/oil protection and an additional warranty - it isn't hard to get up to or over 110% of the car's value.
- kylehotchkiss 10y ago
  If your credit score is bad, you are probably getting quoted a 15-25% interest rate (my first quoted interest rate was 25% at carmax when I first started working). They can recover depreciation pretty quickly in that case.