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People who give out car loans want you to pay back the loan. They don't want to repossess the vehicle. There is a real cost associated with it and you can't jus

• BoorishBears 4y ago
  Not sure why you picked July 2021 on a monthly index... easily the most misleading month in the last decade: https://www.fitchratings.com/structured-finance/abs/auto-indices#u.s.-auto-indices https://www.fitchratings.com/structured-finance/abs/auto-ind... As soon as the government assistance I'm advocating dried back up we skyrocketed back to historical highs of subprime delinquency. And notice how when graphed together, right on the timeframe I describe of 5-10, you see a massive divergence between subprime and prime trends even in your own article. Recovery rates tell you percentages, not absolute scale. (graph is a stunning representation of our current K-shaped recovery btw) With cheaper repossessions the scale was what increased, and that's what Fitch is referring to with record performance. We gave more people than ever who couldn't afford loans loans, and so while the relative rate of recovery didn't change, delinquency went insane, and is gearing up to get even more insane with the interest rate hikes. > People who give out car loans want you to pay back the loan. I can't tell if this is just a naive or at least uninformed take. At a high enough level the financial system wants people to pay back loans... but that's not what's being discussed here. - There are dealers who want buyers to fail to pay. They're additionally enabled by both GPS trackers and license scanners to be even more efficient in their grift. Additionally, you accidentally exposed an amazing example of what I described in terms of "we will subsidize it either way" We don't provide a direct form of assistance specific to cars... but we did pay individuals to keep them afloat during the pandemic. They then had to take that money and pay subprime lenders to keep cars with exorbitant interest fees for longer, driving record profitability for the subprime market. Now interest rates are spiking, those people are losing their cars. They're in a more desperate situation than ever, with less assistance then when interest rates were better. Used car prices fell, but not enough to cover all the ground they gained during the heat of the pandemic. It's like this country just lets looming crisis walk up face to face without every trying to change course lest we seem like communists. To me this shouldn't even be a partisan issue, we can enable a smaller need for government intervention in the next economic slump by just not donating money to these lenders
  • bko 4y ago
    So you're saying car repossessions can yield a profit? I've never seen recovery even approaching 100% and every state I've seen restricts what you can do with repossessed cars (eg new York makes it go to auction if 60% has been paid off and give proceeds back to borrower). I picked the first site i found that has something about subprime auto severities. This is pretty common sense to anyone in the industry. No offense but i don't think you know what you're talking about. Where are you getting this information? Talk to someone in the industry
    • BoorishBears 4y ago
      That "site" is Fitch Ratings, and you seem to not know much about what they do: subprime auto loans are an ABS (asset-backed security) so there are multiple monthly indicators you can get from Fitch or any of the big three. > So you're saying car repossessions can yield a profit? Yes! You don't understand how Buy-Here Pay-Here works if you're going on about auctions. Here in CA it's been legally defined specifically to try and help protect a vulnerable population, but the MO is the same wherever you go: - 90% of all their loans are kept in-house for 90 days - The dealer does not primarily deal with new cars That means if they repo the car within 90 days, they're out of pocket exactly the cost of the recovery and the depreciation... so they just lean heavily on cars that are at the end of their useful lives, then ask for just enough down to cover the repo and a sliver of profit. They let the fish go, and hope the inevitable* happens within 90 days, so they take the car back and sell the account to collections for a few extra pennies. And obviously it's the junkiest of junk debt so it's not worth much, but there are bottom feeding collection agencies that will use barely legal tactics to try and squeeze just a tiny bit of extra blood from the stone. * To understand how far these places are willing to go: CA needed to pass a law to prevent them from requiring in person payments and force them to disclose the trackers (most states don't require this). That's because they'd require all payments to be made on-site, then have recovery waiting for the end of business to take cars. Can't get there because of work? Repo'd. Can't get there because of a court date? Repo'd. Can't get there because the POS they sold you isn't working? Repo'd and patched up just enough to hobble along enough for the next desperate buyer. And to be clear, CA is in the minority in preventing that, this is still happening across the nation at a scale that's never been seen before. - To be even more efficient, they're starting to take on more of the collections processes themselves, often with disastrous results: https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-first-action-against-buy-here-pay-here-auto-dealer/ https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes... https://www.autoremarketing.com/bhph/three-ways-improve-collections-recovery-departments/ https://www.autoremarketing.com/bhph/three-ways-improve-coll... > After five years, Fransen transitioned from a third-party collection environment to a buy-here, pay-here finance company and specialized in developing a successful in-house recovery department. - I mean seriously, what do you think the loss in value on a 150k mile 2005 Sentra with a mean belt squeal and an extra 1000 miles on it since the last repo is? They're dealing with desperate customers at the bottom of their list of choices so it's not even factored in into the price. The only "wrench" in this is if someone manages to keep the car long enough that they can't keep the loan in-house... but by the time that happens they've already made their money: They didn't sell the car at a good price to a desperate buyer, the loan has matured so it's a little more, and it's not their problem if it needs to be repo'd. Overall this is a discussion about the intersection of multiple massive industries that each do enough revenue to form their own countries. No offense, but you definitely don't know what you're talking about if you think you can reduce it to just needing to be "in the industry".
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• bluGill 4y ago
  Not the scummy low end of the auto loan business. They want you to pay for a couple months and then reposes the car. They are selling older cars, so just a couple months of payment is more $ than the depreciation of the car, and when it comes back they can sell it again. While they maybe have to pay you back for the value of your owned part of the car, they can charge repossession and detail for sale fees first. They do need a few people who pay off the whole car. These are the case studies they use to shout how great they are for taking a chance on someone who turned their life around.
  • bko 4y ago
    You understand that if i lend you $100 to buy a car, you pay off 50%, i can sell the car for $70, i would have to give you $20 (you only owe me $50). There are strict rules what you can do state by state, but generally you can't repossess something worth more than the outstanding balance and keep the rest as a profit For example here's NY state If you've already paid more than 60 percent of the amount you owe when the car is repossessed, the creditor must auction it within 90 days. During this time, you can still get your car back, says the New York City Bar Legal Referral Service. You have up until the car is actually sold or leased to settle with the lender. You might have to pay the past due amounts, but often you'll be asked to pay the entire loan balance. After the auction, the creditor can apply the proceeds toward fees and expenses relating to the repossession and the unpaid balance on the loan. The lender must give you a completed an Affirmation of Repossession and Bill of Sale. After all expenses are paid, you're entitled to the balance of the proceeds. https://www.sapling.com/6669128/new-state-car-repossession-laws https://www.sapling.com/6669128/new-state-car-repossession-l...
    • sangnoir 4y ago
      >...if i lend you $100 to buy a car, you pay off 50%, i can sell the car for $70, i would have to give you $20 (you only owe me $50) The trick is to lend me $100 on a $40 dollar car that I cannot sell for $70. Nevermind the fact that in most states I can't sell the car for any amount as the dealership owns the lien. > There are strict rules what you can do state by state, but generally you can't repossess something worth more than the outstanding balance and keep the rest as a profit A lot of articles have been written about scammy "Buy Here, Pay Here" autosales that exist despite the strict rules. Since the dealership is financing the car, they can tweak the initial balance and monthly payments to their liking, while following the letter of the law but hitting the repo quota on the same '97 Honda Civic.
• jessaustin 4y ago
  Loans at e.g. luxury-brand dealers are sold with the expectation of payment. There are other business models, however. There are some auto "dealers" who are really just rental places with another name. When they repo a vehicle, they perform the minimum of service and repair and then it goes back on the lot. A 7yo used car doesn't really lose any value from adding 5000 miles to the odometer, so the exorbitant finance fees go mostly to profit. Vehicles that get absolutely trashed are a loss, but that's why the lenders want every repo to be a surprise to the creditor.