Subprime Auto Lenders Folding

Armstrong Economics ^ | 28 Oct 25 | Martin Armstrong

[Lockbox]

Their customer base is being shipped out the country! Even if it’s only 15% of the customer base, that’s 15% loan loss!

[dangus]

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.

[Dan Zachary]

Subprime lenders gave us 2008.

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

[Myrddin]

Both of my F150 trucks are owned free and clear. I had to have the brakes done on the 2015 F150 SuperCrew at 138,000 miles. Rotors and pads. $1500. Last weekend, the emergency brake cable snapped. Parts ordered. Repair will be $450. Aside from the master cylinder failure, the vehicle has been very reliable. Ford covered the master cylinder failure as a class recall. My 1999 F150 SuperCab has 68,000 miles on the odometer. I purchased it used in 2003 with 22,500 on the odometer. The only major failure has been the fuel pump failure when temperatures dropped to -21F in the driveway. The ethanol tainted fuel attracted water. Ice destroyed the pump. I use only ethanol free fuel now. No more problems. I'm still on the first tank of gas for 2025 and the 4th battery recharge.

[Georgia Girl 2]

We are still happily driving our 2003 Ram 2500 and our 2006 Honda CRV.

[PAR35]

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.

[Rockingham]

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.

[The Duke]

I've got a red 2003 Expedition and a red 2007 Expedition, and I love going to my mechanic. When I write him a check for work he does I think about all the monthly car payments I'm not making.

Besides, the 2003 is the perfect dog-mobile!

[BobL]

“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.

[rxh4n1]

No money for a down payment? We’ll lend you the money.

[Tunehead54]

2008-2009 Subprime Mortgage replay? Is Wall Street buying up car loan packages? Suppose I could read the article but save me some time? With interest rates up with people paying 30% on credit I would not be surprised.

Thanks. ;-)

[OldMissileer]

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.

[Dan Zachary]

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.