4 ms·

There's been a lot of apprehension around auto lending for a long time. I'm not sure what a crash would look like though.

smt88 7y ago
Very different from a housing crash in important ways, that's for sure. Vehicles are much more "liquid" -- they're portable and fungible to some extent. A bank repossessing many vehicles will get much more of its money back than a bank trying to sell foreclosed houses.
- dsfyu404ed 7y ago
  While I would totally love to see a used vehicle price crash because it would be good for me personally and to stick it to the "hurr durr, muh resale value" types, I'm not convinced that wouldn't have reverberations throughout the market.
  - smt88 7y ago
    I agree it would reverberate. I just don't know if it would be the first domino to fall in a massive economic crisis, the way housing was.
- gizmo686 7y ago
  Vehicles also lose much more of their value than houses. The second you drive a new car out of the dealership, you are underwater unless you made a good downpayment; and it is not uncommon for people financing cars to find themselves underwater on their current one if they want to upgrade (or sell/downgrade to get out of debt). And that is in a good market. If there is a surge in used car supplies, we will see them depreciate even more. In contrast, in a typical market, it is uncommon for houses to be underwater, as they tend to appreciate in value. It took a crisis in the housing market for a large portion to go underwater. A simmilar crisis in a market where underwater is the norm would just push them further under.
  - smt88 7y ago
    > Vehicles also lose much more of their value than houses. In a housing bubble, houses lose a lot of their value because the buyer side of the market shrivels up.
- edoceo 7y ago
  Banks, and really all loans, make mad cash the first few years, 90%+ of the payment is interest. For cars, that's like 18mo, for homes it's a few years of good cash flow for the bank, and the home appreciate (cars don't) so when the bank is flipping a flipping a foreclosure, they still make out great.
  - smt88 7y ago
    > the home appreciate In a housing crash, this is exactly what doesn't happen.

smt88 7y ago

Very different from a housing crash in important ways, that's for sure. Vehicles are much more "liquid" -- they're portable and fungible to some extent. A bank repossessing many vehicles will get much more of its money back than a bank trying to sell foreclosed houses.

dsfyu404ed 7y ago
While I would totally love to see a used vehicle price crash because it would be good for me personally and to stick it to the "hurr durr, muh resale value" types, I'm not convinced that wouldn't have reverberations throughout the market.
- smt88 7y ago
  I agree it would reverberate. I just don't know if it would be the first domino to fall in a massive economic crisis, the way housing was.
gizmo686 7y ago
Vehicles also lose much more of their value than houses. The second you drive a new car out of the dealership, you are underwater unless you made a good downpayment; and it is not uncommon for people financing cars to find themselves underwater on their current one if they want to upgrade (or sell/downgrade to get out of debt). And that is in a good market. If there is a surge in used car supplies, we will see them depreciate even more. In contrast, in a typical market, it is uncommon for houses to be underwater, as they tend to appreciate in value. It took a crisis in the housing market for a large portion to go underwater. A simmilar crisis in a market where underwater is the norm would just push them further under.
- smt88 7y ago
  > Vehicles also lose much more of their value than houses. In a housing bubble, houses lose a lot of their value because the buyer side of the market shrivels up.
edoceo 7y ago
Banks, and really all loans, make mad cash the first few years, 90%+ of the payment is interest. For cars, that's like 18mo, for homes it's a few years of good cash flow for the bank, and the home appreciate (cars don't) so when the bank is flipping a flipping a foreclosure, they still make out great.
- smt88 7y ago
  > the home appreciate In a housing crash, this is exactly what doesn't happen.