Subprime Auto Lenders Are Confident, Analysts Aren't

http://www.cnbc.com/id/20532563 ^ | 8-31-07

[Hydroshock]

Subprime Auto Lenders Are Confident, Analysts Aren't Topics:Automobile Industry | Credit | Housing | Mortgages | Subprime Lending Sectors:Automobiles and Parts Companies:Goldman Sachs Group Inc | JPMorgan Chase and Co | Wells Fargo and Co | Citigroup Inc | HSBC Holdings, plc. | Capital One Financial | AmeriCredit CorporationBy Reuters | 31 Aug 2007 | 12:56 PM ET Font size: U.S. subprime auto lenders say they do not see a rising wave of defaults, but over the past year they have made a number of moves to burnish the scratches and dents in their loan portfolios.

AP --------------------------------------------------------------------------------

Triad Financial, partly owned by Goldman Sachs Group, recently disclosed that 21.4 percent of the loans in its portfolio have been granted payment extensions to help borrowers experiencing financial troubles. That's an 88 percent increase over the level reported at the end of June 2006.

The company did not return calls seeking comment.

Payment extensions are a fact of life in the $300-billion-a-year industry, giving companies a better chance at collecting more money over the life of a loan.

In recent weeks, shares of U.S. subprime auto lenders have been hammered as investors link them with the meltdown in the subprime mortgage industry.

"It's guilt by association," said Chris Choate, chief financial officer of AmeriCredit, one of the largest independent U.S. subprime auto lenders.

AmeriCredit competes against bigger and more diversified lenders, including Capital One Financial, HSBC Holdings' U.S. consumer unit, Wachovia, Citigroup, JPMorgan Chase and Wells Fargo.

[Greg F]

Payment extensions are almost automatic with some lenders. Especially if you have a good payment history and it just extends the life of the loan. I get offers all the time from my lender offering an extension. I don’t think the 20% figure indicates real economic problems for those taking the extension — more like foolish desire for money now, pay later.

[the invisib1e hand]

subprime lending (with securitization) is loan sharking in a silk tie.

[taxcontrol]

..... with a lot more paperwork.

[umgud]

What the heck is a subprime auto loan? I understand extensions, but thought those were only for a one month period.

[PayNoAttentionManBehindCurtain]

The car sub prime car market is here to stay.

The little guys have been doing this for years, its what gave the used car guy the bad rep.

But they service a large market with high risks, I wouldn’t call them loan sharks, just riskey business owners.

The big guys just found this market a few years back, they may have over played their hand but will adjust and will not leave this very very large market.

BigMack

[Moose4]

I assume that the loan my wife and I had for our car (a 2000 Focus bought used in 2002) was subprime, because my credit is shot and we were paying a very high double-digit rate. We paid it off on time, though.

}:-)4

[glorgau]

A guy I knew had one a used car lot and most of his sales were to the lower income element with high interest rate loans. He said that he was never able to collect on any loan that went bad and rarely did anyone ever finish paying them off. They just repossessed the cars and sold them again and again and again...

[Hydroshock]

And hopefully he reported it to the credit bureaus, that way you start to get good credit.

[Hydroshock]

In high school my art teacher’s husband own a used car lot, she told me of a ford pickup that they had sold 5 times. They bought it at auction for $500 (1986), sold it for $500 down (each time) plus 36 months of payments. The repo’ed it 4 times adn were waitign on the fifth.

[PayNoAttentionManBehindCurtain]

Its for Burl Gene down the street.

His pick up just blew up and Burl Gene has a credit score of -620.

No problem just trot on down to Larry the yes mans auto lot and pick out that almost new PU and Larry the yes man will tote the note for old Burl Gene complete with easy weekly payments at 28% interest.

Forgot to say...in most cases Burl Gene will half to come up with a down payment, usually what old Larry the yes man has in the PU.

Its a win win, unless old Burl Gene misses a easy monthly payment. :)

BIgMack

[Petronski]

I assume that the loan my wife and I had for our car (a 2000 Focus bought used in 2002) was subprime, because my credit is shot and we were paying a very high double-digit rate. We paid it off on time, though.

Some members of the FR vulture set think that loan was a risky scheme, should not have been made, and that others similarly situated can just shut up and take the bus.

[dighton]

Defaulters will be eaten.

[absolootezer0]

oro people that think ahead. i’m already ahead on my auto loans, so i’ll take the money i was supposed to pay on the auto loan and apply it to my mortgage.

[Lijahsbubbe]

They sell to illegals too. I’m sure that’s added to the higher rate of defaults and extensions.

[Greg F]

Nice. Or set it aside so there is no loan for the next auto . . .

[Hydroshock]

Yes, On the west side of the town I live in and in the neighboring town there is a large section that is no long part of the English speaking world. A lot of used car lots with Mexicam flags.

[CDHart]

Good money and it's OK as long as you don't get shot while you're repoing.

Carolyn

[Vince Ferrer]

I’ve started to hear a couple of ads for 0% financing again, which I haven’t heard in a while. Hopefully that will be the trend for a while, because I’ll be in the market for a vehicle in about a year.