Posted on 08/04/2022 9:11:56 AM PDT by Signalman
LAS VEGAS (KSNV) — A perfect economic storm of inflation, soaring gas prices and the unintended consequences of the federal pandemic relief programs is closing in on many car owners.
“We’re talking, on average, 15,000 repos a day nationwide,” said Mark Zane, owner of a repossession company and president of the Nevada Association of Licensed Repossessors.
Zane says repossessions were all but non-existent during the pandemic because banks were working with car owners to defer payments or help them get caught up.
Those days are ending, however, and banks are taking the necessary steps to start the repossession process on vehicles in default.
“Right now, we're seeing a slow move because of the banks and the national lenders have to wait until their criteria is hit with default,” said Zane. “So, if the criteria of lender X was 90 days and we sent out a report, we're in that 90-day period right now where you had a lot of people that were able to get caught up on their car because they didn't have those old back payments.”
“Right now we're in the middle of waiting for the default to hit,” Zane said. “Our big problem is we're telling the national lenders don't wait that long, because if you hit us and blow us up with everything that we believe is coming because of the way the economy is currently, then we're not going to be able to service those contracts.”
While many car owners are struggling to make their monthly payments because of inflation and high gas prices, economist Mike PeQueen says the source of the problem can be traced back to the COVID-19 pandemic, when many people, flush with stimulus checks, decided to buy a car they would eventually struggle to pay for when the government money stopped.
“If this were really a bad trend, we would see repossessions from across the board - people that bought in a four- or five-year period,” PeQueen said. “But it's really just limited to that two-year period where the majority of this is which does seem to indicate that it was a strange time, which we knew. And people made strange economic decisions based on how much money they had in their pocket, which was not a sustainable amount of money.”
There is an upside, however, according to PeQueen. While used car prices soared during the pandemic, adding more inventory by way of repossession should help bring prices back down.
“A picture of repossession of automobiles above average for the next several months is not something positive for the economy, that's for certain,” said PeQueen. “What it will do is probably take some of the steam out of the used car market,” he added. “That is probably over now with this new supply of cars coming in from the repo side of things.”
My guess all of the repos will be crushed and recycled rather than dumped back on the market which would cause more defaults. It’s what they may do. I hope I am wrong.
I know several people who bought vehicles they shouldn’t be able to afford
One kid bought a $67K truck
He makes about $35K
I just shook my head knowing what is coming
That's why you invest in individual equities and NOT "the market"!
Then your informed investments are more likely to be GAINS, not losses.
i.e. High Yield energy stocks throw off ~7% even when the stock price is volatile.
(ET, EPD, CEQP Preferred)
Your mileage may vary....
I can afford luxury vehicles as well
I drive 2016 Ford Fusion S
241,000 miles
And it seems to be an inverse phenomena.
Most of the poor folks I know have car payments. And for stupid cars and trucks.
Where I used to work (electronics/security maintenance tech) *all* of the janitors who came in (6-10, a big building) had new, fancy/pimped out cars. I made 2-3X and was driving a 17 year old Dodge colt with 280K miles.
Did you buy your first house with cash?
I agree that that you should not finance a used car but there is nothing inherently wrong with getting a new car loan so long as you maintain a decent debt/income ratio (generally 36% or less). A new car should easily last you 7-10 years so if you get a four or five year loan, you will be in position to have a few years without a car payment in which you can save for your next car.
However, there are smart and dumb ways to finance a new car. I would recommend at least a 30% down-payment, so that you are never upside down on your car. That way, the resale value of your car always exceeds your loan, so you can unload the car and pay down the loan if you ever get yourself in a pinch. Also never go past a five year loan. A four year loan is ideal.
I've used that approach for years. The result is I was able to put over 50% down on my last car and the car payment is just under $400/mo. My company gives me a $700/mo car stipend so I'm actually coming out ahead of the game.
I know some that are paying almost $1,000/mo on their car loan - now that is just crazy. If you are paying that much on a car loan, you definitely cannot afford the car you are driving.
Financially savvy, you are not.
You think the government is going to let that happen?
That’s my philosophy too. And it’s especially true with a money-sucking, depreciating asset like a car. Taking out a loan to buy a vehicle for personal use is one of the dumbest financial choices out there. I’m sorry, if the only functional car out there that you can afford for cash is a 2008 Corolla then that’s what you should be driving.
Little piece of advice. If you think taking a loan to buy a car is one of the dumbest things you can do, you should not be making any financial decisions on your own.
“My guess all of the repos will be crushed and recycled rather than dumped back on the market which would cause more defaults.”
I doubt it.
Well, I’m doing pretty well financially — not quite “the 1 percent” but close to that — so I’m not inclined to take your advice regarding my ability to make financial decisions. Bless your heart.
And she’s still working as a house keeper?
used car lots got lots of it too..
I was selling cars to unemployed people and the banks were writing the notes because they had 25% down..
ya, well... when the government cheese ended.. so did their income.
Yes it does.
could have sold it back to the dealer. it’s worth as much used as it was new.
I sell used cars..
I daily a 06 postal dodge minivan (still left hand drive) that I paid 400 for at auction.
I get it, but every broke buyer that strolls in wants the newest cleanest car on the lot.
I should tell um that is why they are always broke (payment poor) but I just push papers. as long as the bank buys the note. not my problem.
honda has had CVT in some cars since the early 2000s. (hybrid civic) hopefully they have figured out how to make one by now.
Not that many..
many older cars from high risk loans are repo’d because they are junk and no longer function.
I saw somewhere that the average new car sale was like $46K.
Are there really that many people who have that kind of money?
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