https://www.thestreet.com/automotive/auto-industry-subprime-lender-files-for-chapter-11-bankruptcy
"....The Dallas-based company operated 65 locations in Texas, Arizona, California, New Mexico, Nevada, and Florida.
An economic downturn among combination auto dealer-subprime lenders also created financial distress for subprime lenders who provide them with financing....
>>The subprime auto lender catered to those “buy-here-pay-here” dealerships that cater to those with bad credit.
Who knew that lending money to people who routinely fail to pay their debts would be risky?
It’s hard for Tricolor’s borrowers to make payments when they’re being deported.
Got a prison record....we don’t care.
Don’t have a job...we don’t care.
Don’t expect to pay us....that’s when we care.
A huge number of people believe you can turn in a car and just walk away. They believe the debt just goes away.
Paid for in the driveway, sure beats working for your car.
Although the cash for clunkers program was a while back, it significantly distorted the car market by taking older vehicles off the market. The average cost of repairs probably went down somewhat. But as more vehicles get older, the cost of repairs tends to go up. I think that as the cars that remain age, the cost of repairs could easily go up by 33%, having nothing to do with what Armstrong said.
Why are these nasty lenders loaning people money who clearly can’t afford it and have no businesses borrowing money in the first place?
But they’re NOT cheaper.
“the upside is cheaper, much cheaper used cars, a good thing.”
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As long as you don’t mind the lingering odor and stains of tacos and burritos.
Made car loans to illegals who who them decided to drive home for a vacation and a new ID.
In finance, subprime lending is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subprime borrowers were defined as having FICO scores below 600, although this threshold has varied over time. These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.
Very few real conservatives are subprime borrowers. Opinion.
Subprime lenders gave us 2008. This will be on the final.
Their customer base is being shipped out the country! Even if it’s only 15% of the customer base, that’s 15% loan loss!
So on average, car buyers are paying an 8%/year premium above the cost lenders can borrow for. Sounds like every last car buyer could go delinquent and banks should still be making hand over fist, except the bad debt is concentrated in smaller, fly-by-night operations, the sort of which were prohibited from mortgage holding with the last debt crisis.
Tote the notes are doing it wrong if they need the monthly payments to stay afloat.
Business model should be sell the car.
Hope the loan defaults quickly.
Repo the car.
Wash the car.
Sell the car.
If someone makes payments, it means you are having to lay out money for additional inventory. Profit is cycling the same car through the lot repeatedly in short order.
The key point may be that subprime auto lenders knew they were taking on risk but craved the high fees and interest. After all, they can be booked to income, with eventual losses used to offset income. Indeed, by selling off the loans, the subprime lenders could even avoid most of the losses.
“Well the upside is cheaper, much cheaper used cars, a good thing.”
Cheaper new cars too. After all, the net effect is ‘easy money’ is to simply drive up prices.
Thanks. ;-)