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Subprime Auto Defaults Are Soaring, and PE Firms Have No Way Out
- downrightmike 9y agoThe way out is to stop scamming people.
- mariuolo 9y agoThing is the people selling the loans aren't the ones who will have to be repaid, so they'll do anything for that commission.
- notfromhere 9y agowho knew bad loans to folks with no means to pay for them would ever backfire?
- russh 9y agoNo problem, we'll just make more of them and once the economies of scale kick-in we'll be rich!
- allengeorge 9y agoDon’t forget to repackage them! I’ve heard that doing so, and partitioning the resulting basket up dilutes the risk and makes them higher quality!
- cirgue 9y agoThis seems like an excellent asset to insure. You're guaranteed profit unless the entire underlying market collapses!
- perl4ever 9y agoI recall reading an article by someone or other which argued that auto loans cannot be a bubble in the way that stocks or houses have been, because generally there is not demand for cars by people who simply want to flip them for a higher price. Everybody who buys a car is buying a depreciating asset because they actually want to use it, so demand cannot get too out of control.
- corvallis 9y agoInteresting argument. Isn't the product being "flipped" the loans, and not the autos themselves?
- notfromhere 9y agoYes, but I can see the argument where its harder to loan out the same vehicle multiple times for ever-higher valuations given that autos depreciate pretty rapidly.
- notfromhere 9y agoThe problem wasn't houses, it was that the loans. It can't fuck the global economy, but car loans sure can screw with financial institutions that throw caution to the wind and start giving the equivalent of NINJA loans for cars
- theonemind 9y agoWe lose money on each unit, but make it up in volume.
- JonnyNova 9y agoThat is what you get for giving out risky loans to marginally qualified applicants just because you could charge high rates. Same applies to the current student loan crisis too.
- akanet 9y agoThose of you interested in the gory details of just how shady subprime auto lenders are getting should read this recent report on one of the big lenders: https://www.plainsite.org/realitycheck/creditacceptance.html https://www.plainsite.org/realitycheck/creditacceptance.html
- TaylorGood 9y agoImpressive and intricate write up.
- acd 9y agoCentral banks flooding banks with cheap credit. It is bound to end up somewhere where there is profit from higher interests and then go bust. Why do we keep saving the banks bad loans? Is there also subprime credit card debt?