Posted on 12/16/2022 12:31:24 PM PST by Drew68
This morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending.
I'm now convinced that there is a massive wave of car repossessions coming in 2023.
Here's what I discovered (and what no one knows):
Background:
Over the past 2 years, many people took out exorbitant loans on cars.
Car values were inflated (and frankly, still are to some extent).
But many people simply had no choice and bought an overpriced a car.
Well...
Car valuations are now plummeting.
Some cars have declined in value as much as 30% y/y.
And these same people that took out these big loans are now "underwater".
Basically, they owe banks more on these cars than they are worth.
And the banks are well-aware of this...
But there is no easy solution.
You can't just put the genie back in the bottle.
This brings me to what happened this morning:
Every Friday I conduct a team meeting to recap our week.
This morning, one of our General Managers opened up DealerTrack — a portal that dealers use to communicate with auto lenders — and highlighted something very concerning:
9 of our lending partners have started WAIVING "open auto stipulations" for consumers.
Wait, wtf does that even mean?
Let me explain using a simple, hypothetical scenario:
1) Consumer takes out an auto loan in 2020/2021 on an overvalued car
2) 2022 comes around and that overvalued car is now rapidly declining in value
3) With the car declining in value, consumer now owes more on the car than it is worth
4) Consumer no longer wants the car. Maybe they outgrew it. Or maybe it keeps breaking. So consumer wants to trade it in.
5) But dealer can't trade the car in because the consumer owes WAY too much on it.
So dealer asks consumer for lots of money down to cover the difference.
6) But of course, the consumer doesn't have $1,000s to cover the difference between what they owe on the car and what it's worth.
And here comes the perfect storm...
7)
Dealer can't sell consumer a car,
Consumer can't buy a car,
And, you guessed it, lender can't finance a car!
Everybody loses! Oh no
So what happens next?
8) Lender knows that most consumers are stuck in this situation, and does the following:
WAIVES THE OPEN AUTO STIPULATION.
Meaning, the lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!
Why the f*** would they do this?
Surely the lender knows that consumers that take out a 2nd auto loan are MUCH riskier and have a MUCH high risk of default? Right?
RIGHT?
Yes, but the lender does it because they know that the consumer will default on the other car !!!!
Dog eat dog style.
Let me be clear:
This is NOT normal.
But it's the only way lenders can finance cars and dealers can put cars on the road.
And the implications of this will be tons of repossessions.
I've been a doubter, but after what I saw this morning, I'm now FULLY convinced that a wave of car repossessions will hit in early/mid 2023.
If lenders are willing to backstab each other in order to put more loans on the road, we're in trouble.
This will not end pretty.
That's all for now.
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I think the dealers and the Mfr’s have screwed themselves.
last year i went to trade in my car and get something new (end of lease). At that point dealers were putting 5-10K “dealer mark ups” on top of retail and not discounting from sticker.
I asked them what the expected NADA Blue book value of a 3 year old $10K dealer mark up was and i would be paying 100-200/ mo for this.
They said, they had it ALL figured out and they knew how to roll that into the trade in price later so nobody took a hit.
I did not buy it then. and did not buy a car.
My 2022 Transit order was priced around 58k. The 2023 prices were jacked on average 6k. Fortunately, Ford is making good on the 2022 quoted prices but only if there is no change to the order.
Because I'm not taking a loan to pay for mine, and I need to spend $ so none of that goes to Ukraine or transsexual surgery, I made a very large deposit on it last week.
More to it than that. We are facing a banking remake. The “Great Reset”? Possibly.
But they failed to convince people to accept that subjection over the past 2+ years of Covid Scam. So they will make a run to collapse the dollar and with it the global economy. We are all sick and tired of constant lies and deception from DC in every breath.
What would that do? Make a lot of hungry desperate people. Some of them Cold, Hungry, Desperate, and without any cushion.
I visited with 2 bankers this week. Doing my end of the year think through for next year. About a week before I questioned a loan officer in the bank I currently use. So that means 3 recently. I shared my opinion and observations of our current situation with each of them. Only one had a clue about the effect of ESG on the financial and insurance world. Only one knew about the Great Reset and the WEF and who is behind it.
I also talked to my insurance agent and he knew what ESG was and about the WEF, the Great Reset, and the Chinese scoring system. Although he did not tell me how he personally felt about it.
I’m currently trying to move away from any company or institution touting ESG. (and the ChiCom scoring system, i.e. command system of slavery.)
Much of DC is bought, O’Biden is pouring Dollars down multiple rat holes as if he intends to totally collapse the Dollar and our economic system.
Yes, this is much bigger than selling cars.
Ah, I see. Still, the level of analysis is lacking but that’s just my opinion. His premise is correct but other than the inflated prices, it’s as it ever was.
And repos have a secondary effect. Lower used car prices.
There will be a black market to convert to LP gas.
It is possible.
Not sure Texas will participate.
We are large enough to go it on our own, if that did become necessary.
(as if he intends to totally collapse the Dollar and our economic system.)
Obama’s 3rd term.
The Manchurian Candidate is still active.
And there are STILL fools who believe in him.
SMH
Insanity. For a fraction buy a used Bronco and put whatever HP engine you want in it.
I don’t get it. Are they saying the dealer takes the older car as a trade in even though the owner is still making payments on it? I don’t think so.
So why is it so unusual that someone may have more than one car loan? Spouses only share one car at a time?
Missing something.
Maybe they could use their $10,000 student loan forgiveness money to pay down their car loan? Oops, almost forgot; they intend to use that money to go to Cancun or maybe travel through Europe. Well, guess we could give the little pukes $20,000. Half for student loan forgiveness and half to flip their upside down car right side up. Let’s think about this. Surely, we can help them out some more. Their stress must be awful 😢….
Lots of low credit score morons used stimulus and extra unemployment money to buy cars they knew would be temporary.
Especially when Caravan crashes and burns.
He is only figuring this out now? LOL.
this is why I am waiting until summer 2023 to buy a used car...
SHTF has already started in the car market and many of us have been watching it ramp up.
Correct. But not all of us will swallow that poison pill.
Not all of us will kneel to these Godless Dictators.
The #ComDems for the past year have been trying to say the Republicans would end social security. (They often project their own thoughts onto their opponent.
So. Here we are.
“Makes me curious about the demographics of those purchases. I bet most are not made by ordinary people with their own money (i.e., fleet purchases from woke corporations and the like).”
~~~
My understanding is that the new cars are not correcting. Used cars are.
I’m not saying that people aren’t going to start defaulting their loans, but I’m not so sure it will be a tidal wave
Of course, like everyone else, I need transportation.
BUT.
I worked in the car biz until I retired 15 years ago. I understand how it works. People do not buy cars based on need. They buy based on emotion and can be easily manipulated into spending way too much money.
That’s why I drive a 1996 F150 and spend my money on things I really need instead of going into debt to serve my ego. (Although the beat up old 4X4 is pretty cool to drive d;^)
What goes up, m
u
s
t
c
o
m
e
down.
Not mine. We own both of our cars free and clear, about to do the same with our house.
“But many people simply had no choice and bought an overpriced a car.”
Stop. They had a choice. They could have bought a car they could afford. But they *deserved* a nice car.
Just like the real estate market in 2008, people will quit paying the loan on the car because it is upside down. Financially, too many people are basically stupid
So I should be in market to get used car this spring?
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