Posted on 10/28/2025 9:05:30 AM PDT by delta7
PrimaLend Capital Partners filed Chapter 11 bankruptcy protection, beckoning the start of America’s personal loan crisis. The subprime auto lender catered to those “buy-here-pay-here” dealerships that cater to those with bad credit. The people cannot pay their loans and the subprime lenders are folding. Delinquencies are rising, repossessions are surging, and the auto-loan market is signaling stresses in the broader economy.
The same issue happened in September with Tricolor Holdings when it filed for Chapter 7 bankruptcy liquidation. Primalend Capital Partners’ assets and liabilities are estimated to be between $100 million and $500 million, as this was no small lender. The auto loan market in the US has seen balances double over the past 12 years. Subprime borrowers have faced the steepest repercussions, with 6.6% of borrowers currently 60 days past due on auto loans, or the highest rate of delinquency on record.
Auto lenders have $1.66 trillion in outstanding loans across the nation, 5% of which are at least 90 days late, up 12.6% YoY. Vehicle costs have soared in recent years, with the average price for a new vehicle coming in at $50,000. Twenty percent of new car owners are paying over $1,000 monthly for their autos.
New car loans have hit 9%, but used cars have hit nearly 14% and buyers seeking buy-here-pay-here loans are willing to take on an even higher fee. Expenses on car repairs alone have soared 33% since the beginning of the pandemic in 2020.
Vehicle repossessions are at their highest level since 2009 during the Great Recession. The trend naturally correlates to historic highs in consumer debt, which spreads into every facet of the economy. The big banks like Barclays and JPMorgan are also taking on hundreds of millions in losses related to these failures and credit stress is on the rise.
Cars are essential for employment in the majority of the nation and subprime borrowers are willing to take on more debt, even when they do not have the funds, to access transportation. This is a massive red flag, especially given the rising rate of unemployment. Consumers have been stretched too thin and it will cause a ripple effect throughout the economy.
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.
They were encouraged by congress to do this. Remember Slobbering Barney Frank stating that Freddie and Fannie were financially sound and the gov't doesn't bail them out if they are not. That they should be doing more loans? Remember Schumer stating how Fannie and Freddie are doing an incredibly good job?
Watch this link
We are still happily driving our 2003 Ram 2500 and our 2006 Honda CRV.
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.
Besides, the 2003 is the perfect dog-mobile!
“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.
No money for a down payment? We’ll lend you the money.
Thanks. ;-)
There is a very good movie about the 2008 sub prime collapse. It is called, The Big Short, and one of the stars is Steve Carell.
I can remember all sorts of scams going on back then. Banks would advertise on tv 100% loan on your home and all you had to do was pay the interest. Then an illegal would buy one, sell it to his friend for more, buy it back for more, etc. Eventually the bank would say no, they would default on loan, and move back to Mexico with lots of money.
President Bush tried to warn us but democrats tried to make it look like he just didn’t want poor blacks to own a home.
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