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From the article: car loans, credit, and person loans (payday loans). Mortgages are highly regulated since 2008's financial crisis. Those subprime lenders exite
by yardie 4y ago
From the article: car loans, credit, and person loans (payday loans). Mortgages are highly regulated since 2008's financial crisis. Those subprime lenders exited the mortgage business and jumped into high interest used car loans. And I'm right there with you on the anal probing I had to practically get to qualify for a mortgage.
- pueblito 4y agoOnly 28% of sales are to first time buys, and 25% of sales are all-cash. Sales of affordable houses under $250k are down 30% YoY
- thebean11 4y ago> Sales of affordable houses under $250k are down 30% YoY ..because those houses are selling for over $250k now?
- arcticbull 4y agoIn part because of continued pressure on prices because of zoning, and in part because people commit chart crimes not adjusting for inflation.
- nimbius 4y agoworth mentioning: the auto lending market in the US is a 1.6 trillion dollar time bomb and has been ever since Cash for Clunkers saw two rounds of federal funding. the average period for an auto loan in the US is over 64 months. any disruption to the paycheck-to-paycheck living of 64% of americans could have a catastrophic effect on the ability to service this debt.
- zamadatix 4y agoI'll bite, what does 3 billion in federal funding for car loans from more than two 64 month cycles ago have to do with it?
- chucksta 4y agoThere are no affordable used cars now, or at least not nearly as many as there would have been, driving up price and the need for a loan.
- zamadatix 4y ago72 million passenger cars have been sold in the US since the program so I don't follow how the <0.7 million scrapped in 2009 (valued to be worth less than 3 billion dollars back then) for newer cars have a noticeable impact on any of this 1.6 trillion dollar loan market 13 years later.
- woodruffw 4y agoUnder 700k cars were exchanged as part of the "cash for clunkers" program, or roughly one out of every 400 the cars on American roads. Emphasis on exchanged: most people went out and bought new cars with the rebate. Plus, all of this was over a decade ago. It's irrelevant on both axes.
- throwaway0a5e 4y agoI agree it's not relevant today but "1/400" is a really dishonest way of framing "removed the bottom of the market" All the cheap beater cars that people just getting on their financial feet would have bought evaporated overnight.
- QuarterReptile 4y agoMore precisely, it removed the portion of the bottom of the market belonging to people who were on the fence about upgrading and making their cars available, so in that way it's similar to EV tax credits going to wealthy people to subsidize their consumption, but with the added hardship on the people down market. I sympathize with the would-have-been sellers. I spent probably 8 hours recently to sell a 16 year old car for $4,200, and it would have been easier to do it the cash for clunkers way. But people buying that car are unable to get something newer or want to get their feet under them financially.
- tomrod 4y agoYou can repossess a car a lot quicker than a house, so there is less of an issue than mortgages.
- cshokie 4y agoWidespread repossession and resale would probably damage the resale value for all used cars.
- abeyer 4y agoresale value for all used cars could use some damage right now
- jaywalk 4y agoChill out, let me get mine traded in first before that happens.
- lazide 4y agoSounds like the type of thinking that won't get you that quarterly sales bonus! Seriously though, just like mortgage originations pre '08, anyone who had qualms about that kind of thing left that industry a long time ago, or never joined.
- frumper 4y agoThese lenders make money on bad and even failed loans. Why sell a car once when you can sell it 3 or 4 times. "buyer of the 1999 Oldsmobile Intrigue at Auto World Auto Sales in February. A 26-year-old single mother of three, she needed a car to get to her new job as a home healthcare aide. She agreed to pay $3,899 — roughly double book value — and put down $1,200 cash on the deal. As the due date for her first installment approached, Fields realized she’d need a few extra days to scrape together the $220 payment. The dealership wouldn’t wait. It repossessed the car a week after the payment was due" https://www.latimes.com/business/la-xpm-2012-aug-15-la-fi-boomerang-cars-20120815-story.html https://www.latimes.com/business/la-xpm-2012-aug-15-la-fi-bo...
- avs733 4y agoand the auto loan business is shady a.f. We ended up invovled with the state A.G.'s office investigating our dealer. They 'accidentally' put a typo in my wife's SSN when pulling the credit report. That justified a higher interest rate - which they offered us without explaining why. We weren't super worried because we were going to pay the car off in a couple months anyways, we just wanted the financing to shift some cap gains taxes to a different year. Then we got a letter in the mail from the lender explaining why our interest rate was so high. We called the dealer - and almost no questions asked they offered to send us a check for the difference. Red flag raised we filed a complaint with the state A.G., and it turns out it was a common practice at that dealership.
- driverdan 4y agoNEVER finance through a dealership. They will never give you the best rates. Often they will get a rate and add their own points on top or include additional fees. Even promotional interest rates don't make sense because they're always offered with an alternative discount. The discount + a traditional loan works out cheaper than 0% interest.
- JumpCrisscross 4y ago> NEVER finance through a dealership Never is a strong word. Dealerships make their money on financing. Refinancing afterwards is straightforward. Negotiating poorly on the dealership's financing, using that to win points on other fronts (e.g. price, maintenance commitments, trade-in value, et cetera) and then repaying the loan a month later, once you've lined up your preferred financing, is perfectly acceptable and often worth the time and trouble.
- gigatexal 4y agoAgreed. And here credit unions are your friend.
- phkahler 4y ago>> NEVER finance through a dealership. They have this awesome thing called negative equity financing. It might have a better name now, but they will pay you X for your old car which is less than you owe and then finance the difference with your new loan. In other words, your loan balance on the new vehicle may be higher than its value but this is glossed over by focusing strictly on monthly payments and "what you can afford". Re-read that, this is not a practice they'd use on people with bad credit because to repo the car will not get them their money back. It's a rip-off for people with good credit and more dollars than sense.
- JumpCrisscross 4y ago> auto lending market in the US is a 1.6 trillion dollar time bomb It was a time bomb. Cars are easier to seize than houses. Given the present shortages, re-selling them at close to the loan balance shouldn't be an issue. It's still a tale of personal tragedy. I know people on the new-car-every-two-years bandwagon who will get screwed when they have an income interruption. But it's not a broader risk, at least not at this time.
- adolph 4y ago> It was a time bomb. Cars are easier to seize than houses. Given the present shortages, re-selling them at close to the loan balance shouldn't be an issue. Will there still be vehicle shortages if a significant number of cars are seized for resale and potentially a significant number of would be buyers are not able to obtain loans?
- ActorNightly 4y agoMost likely yes, considering the major supply chain interruptions with the craziness that is going on in China, oil uncertainty with issues in Russia, e.t.c. There is also the issue of raw materials, which can be reused.
- nimbius 4y agowhile it seems that way initially the reality is more complex. waves of repossession means waves of employees who cant get to work anymore. repossessions arrive on your credit history as a major blemish, meaning you cant get credit for a new car. your credit card interest goes up as a result, unemployment ticks steadily up as well until the market reacts parasitically, and eventually the car you picked up for loan balance cant go for even a fraction of that because of the surprise 1.6 trillion dollar recession you triggered. its more palatable to subsidize these dicey loans (as we did in 2008) then come to jesus with the grim reality of following the letter of the lender instead of the spirit of the loan.
- conductr 4y agoSo you're saying it's all a house of cards? (/s ... kind of)
- tmaly 4y agoShould federal reserve bailout the auto loan market?
- QuarterReptile 4y agoDepends how many pension funds are invested in its financial derivatives.
- imtringued 4y agoThis is something people don't realise. Those bailouts are there to bail out the lenders not the borrowers. The Greece bailout was actually bailing out German banks for example.
- htrp 4y agoFYI there is a non trivial amount of sumprime auto with terms of 96 or 108 months.
- jimt1234 4y agoAlso, did the Trump Administration relax a bunch of regulations around predatory loans? I recall the auto and payday loan industries were very happy.
- adrr 4y agoWondering if it is hitting the installment tech companies like Affirm and Afterpay.
- deleted 4y ago[deleted]