[Not So] Wild Ass Rumor of the Day: Banks Redlining Domestics?

The Truth About Cars (website) ^ | November 16, 2008 | Michael Martineck

[Reverend Wright]

This is the next logical stage, once the bankruptcy is assumed to happen. The auto residuals are relevant to the lender for the life of the loan. So a bailout that extends Detroit thru next year does not help much.

[ReformedBeckite]

Its hard for banks to complete for the 0% interest the car manufactures give out to sell the cars nobody wants to those that can't afford it anyway and will belly up on the loans, but hey the dealers get their commision for the day so they don't care either.

Its not quiet free either, strings attached all over.

[bert]

If there is no real news.....make something up.

[Reverend Wright]

“If there is no real news.....make something up.”

Fair point, it is only a rumour, and is identified as such.

But it makes sense, if you were a bank, would you write a 60 month loan for a GM car? What residual do you assume in case of default?

[Yo-Yo]

I would think that it is leasing more so than outright purchase loans that are getting harder to get for domestics.

A lease is the bank betting that the car will be worth more at the end of the lease than the sum of the lease payments applied to the new car price.

If leasing a car from a company that may go bankrupt, there is no way to predict the residual value of the vehicle. Nor is there any expectation that those “lifetime” powertrain warranties will be honored.

[carjic]

I am in the business working for a major bank in the Auto Finance business. It’s what I do. I see no evidence of this happening. However it’s hard to know who will be able to pay back loans with the economy tanking. So its back to the old style lending. Money down, rate assigned by risk of loan, no multiple autos. Its tough out there right now.

[John Galt's cousin]

Point taken, but aren't banks still looking at the credit-worthiness of the borrower? If most of us went to borrow money, the form of the collateral is minor. the lender knows we pay our debts, even if the car might be worth less than the balance at a point in time.

On leasing, I am not so sure, as whoever gets the car when the lease is up will be very concerned about the projected value at that time.

Has anyone researched the values of vehicles coming off lease? I suspect thee may be some low mileage bargains to be had.

[Jeff Chandler]

I just cosigned on a new (domestic) car loan from a credit union on Friday. Good rate, no problem.

[Reverend Wright]

“I would think that it is leasing more so than outright purchase loans that are getting harder to get for domestics.”

Yes, good point. However I think that happened at the end of july when gm and ford and chrysler in effect ended their leasing programs.

http://online.wsj.com/public/article_print/SB121737722208895269.html

[Jeff Chandler]

There haven’t been any good lease deals for quite some time, so there aren’t any cars coming off lease. That’s what I was told by the local Chevy dealer, and I know there aren’t any good leases out there now without a larger down payment.

That being said, The 2008 Silverado my daughter bought came with $5500. in factory rebates, so buying was the best way to go anyway.

[carjic]

Credit unions are taking up a lot of the slack but not near enough to make a big difference.

[Jeff Chandler]

Well, then I guess the buyers just have to have good credit?

[Reverend Wright]

Appreciate the input from someone in the industry.

How much leasing of domestics is still going on, given that the domestics announced the end of their leasing programs in july?

http://online.wsj.com/public/article_print/SB121737722208895269.html

[VOA]

“
The scuttlebutt:
banks still willing to make new car loans are more so when the make is foreign.
“

Well, the story (such as it is and not referenced!!!) is that
illegals are keeping up their mortgage payments more than our
“real citizens” by a couple of points.

Something like 98% for the illegals compared to
something like 92% for legal citizens of the USA.

Who knows what the truth is?
In this election/political season in which Obama AND DUBYA would
LOVE to leave the impression that REAL CITIZENS are less trustworthy
than the ILLEGAL INVADERS that the real citizens have been FORCED
to subsidize at Emergency Rooms, Surgical Suites, Welfare Lines and
other GIMMEES of the kind, charitable USA.

Remove most of the tax payments from my salary and I’ll surely be
able to make mortgage payments that my LAW-ABIDING, PLAY-BY-THE-RULES
Legal US Citizen Won’t be able to make in a more timely manner!!!!!!!!!!!!!!!!

[carjic]

Yes they do. However rate is assigned by risk. And a good FICO score is not the only factor.

[carjic]

My bank got out of leasing many months ago. Its impossible to guess how much value a vehicle with be worth down the road. Especially in this market.

[dilvish]

I doubt Detroit bankruptcy has anything to do with it. Foreign cars by and large hold their value better, if you have to repo you’re more likely to make back the money on cars with a better resale value. In a tight lending market banks need to consider all the angles, they need to put themselves in the best position to get back all their money.

[Reverend Wright]

Is that no leasing at all, or just no domestics?

BMW and the japanese still have manuf backed leases.

[rbg81]

This is kind of stupid. It should make no difference who makes the car, only who is applying for the loan.

That being said, the spectre of bankrupcy can’t be helping Big Three auto sales. Who wants to buy a car if there is no one around to honor the warranty?

This whole situation is really sad.

[KStorm]

That’s less money to the UAW>Democrat Party>Obama if imports are bought. So there’s an upside.