4 ms·

US auto loans have a total of 1.1 trillion outstanding, writing that off wouldn't affect the markets at all or increase the cost of debt?

toomuchtodo 8y ago
That collateral is easily repo’d and disposed of. Think Rent A Center. The margins on the vehicles being sold make up for estimated losses.
- neom 8y ago
  https://www.pionline.com/article/20181101/ONLINE/181109968/list-of-struggling-multiemployer-plans-grows-in-2018 https://www.pionline.com/article/20181101/ONLINE/181109968/l... https://www.mercatus.org/bridge/commentary/pension-crisis-you-may-not-know-about-yet https://www.mercatus.org/bridge/commentary/pension-crisis-yo... https://www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse https://www.bloomberg.com/news/articles/2018-10-17/the-stude... https://www.citylab.com/transportation/2019/02/subprime-car-loans-buy-automobile-lending-debt-trap/582652/ https://www.citylab.com/transportation/2019/02/subprime-car-... I think multiple sectors of underfunded pension, student debt and auto debt all coalescing at once is the problem, not any one of them individually. You're also negating that folks defaulting, massively hinders their ability to move in the financial system. And yes, you can put cars back into the system the same way you can put houses back into the system, but it doesn't matter if no one wants cars.
  - toomuchtodo 8y ago
    > You're also negating that folks defaulting massively hinders their ability to move in the financial system. Quite the contrary. Lenders will lend to you immediately after bankruptcy because you can't default again for seven years, for example. If you have bad credit, you can still get credit! Just at a higher interest rate. I am familiar with lenders who will get you a mortgage the day after foreclosure for 200-250 basis points over conventional rates (6-6.5% versus 4%, in this case). Economic drag due to student loan debt that can't be discharged is a separate issue (with those debtors delaying or opting out entirely of home ownership and/or children). Pensions will get dumped onto the Pension Guarantee Corp with a reduced benefit payment to those entitled to such, and any federal debt will get inflated away through the Fed (not great, but what happens when you have your own central bank). As I said, I think the only "great unwind" or credit crunch in the near future is corporate bonds.
    - neom 8y ago
      What lenders you are specifically referring to?
      - toomuchtodo 8y ago
        Subprime credit cards: https://www.cardrates.com/advice/list-of-subprime-credit-cards/ https://www.cardrates.com/advice/list-of-subprime-credit-car... Subprime auto lenders: https://www.cyberleadinc.com/subprime-auto-lenders/ https://www.cyberleadinc.com/subprime-auto-lenders/ Nonprime mortgage lenders: https://www.nonprimelenders.com/lenders/ https://www.nonprimelenders.com/lenders/ Prime = good borrower. Subprime/nonprime = not a good borrower. Just quick examples, lots more out there. It is incredibly difficult not to qualify for credit entirely. Someone, somewhere will lend to you at an interest rate in accordance with your risk profile. Investors are hungry for returns.
        neom 8y ago
        Oh boy, ok. Just making sure that's what you'd say. Good luck out there pops.

toomuchtodo 8y ago

That collateral is easily repo’d and disposed of. Think Rent A Center. The margins on the vehicles being sold make up for estimated losses.

neom 8y ago
https://www.pionline.com/article/20181101/ONLINE/181109968/list-of-struggling-multiemployer-plans-grows-in-2018 https://www.pionline.com/article/20181101/ONLINE/181109968/l... https://www.mercatus.org/bridge/commentary/pension-crisis-you-may-not-know-about-yet https://www.mercatus.org/bridge/commentary/pension-crisis-yo... https://www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse https://www.bloomberg.com/news/articles/2018-10-17/the-stude... https://www.citylab.com/transportation/2019/02/subprime-car-loans-buy-automobile-lending-debt-trap/582652/ https://www.citylab.com/transportation/2019/02/subprime-car-... I think multiple sectors of underfunded pension, student debt and auto debt all coalescing at once is the problem, not any one of them individually. You're also negating that folks defaulting, massively hinders their ability to move in the financial system. And yes, you can put cars back into the system the same way you can put houses back into the system, but it doesn't matter if no one wants cars.
- toomuchtodo 8y ago
  > You're also negating that folks defaulting massively hinders their ability to move in the financial system. Quite the contrary. Lenders will lend to you immediately after bankruptcy because you can't default again for seven years, for example. If you have bad credit, you can still get credit! Just at a higher interest rate. I am familiar with lenders who will get you a mortgage the day after foreclosure for 200-250 basis points over conventional rates (6-6.5% versus 4%, in this case). Economic drag due to student loan debt that can't be discharged is a separate issue (with those debtors delaying or opting out entirely of home ownership and/or children). Pensions will get dumped onto the Pension Guarantee Corp with a reduced benefit payment to those entitled to such, and any federal debt will get inflated away through the Fed (not great, but what happens when you have your own central bank). As I said, I think the only "great unwind" or credit crunch in the near future is corporate bonds.
  - neom 8y ago
    What lenders you are specifically referring to?
    - toomuchtodo 8y ago
      Subprime credit cards: https://www.cardrates.com/advice/list-of-subprime-credit-cards/ https://www.cardrates.com/advice/list-of-subprime-credit-car... Subprime auto lenders: https://www.cyberleadinc.com/subprime-auto-lenders/ https://www.cyberleadinc.com/subprime-auto-lenders/ Nonprime mortgage lenders: https://www.nonprimelenders.com/lenders/ https://www.nonprimelenders.com/lenders/ Prime = good borrower. Subprime/nonprime = not a good borrower. Just quick examples, lots more out there. It is incredibly difficult not to qualify for credit entirely. Someone, somewhere will lend to you at an interest rate in accordance with your risk profile. Investors are hungry for returns.
      - neom 8y ago
        Oh boy, ok. Just making sure that's what you'd say. Good luck out there pops.