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Will We Never Learn?

Tyler Durden's picture




 

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Just Keep Dancing: Introducing The 97-Month Auto Loan

While many of us have been shouting about this from the rooftops for years now, with each passing day it becomes more clear what a terrifyingly gigantic powder keg we have created.  There is no debate that this will end in a compete financial holocaust, the only question is when and how.  As time progresses, the practices and desperation of the status quo to keep the sheeple in debt and consuming is getting increasingly insane.  We learn from the Wall Street Journal that:

The average price of a new car is now $31,000, up $3,000 in the past four years. But at the same time, the average monthly car payment edged down, to $460 from $465—the result of longer loan terms and lower interest rates.

 

In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever, according to Experian Information Solutions Inc. Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months and there were even a few as long as 97 months. Four years ago, only 11% of loans fell into this category.

 

Such long term loans can present consumers and lenders with heightened risk. With a six- or seven-year loan, it takes car-buyers longer to reach the point where they owe less on the car than it is worth. Having “negative equity” or being “upside down” in a car makes it harder to trade or sell the vehicle if the owner can’t make payments.

Hmmm, sound familiar?

Car makers have mixed feelings about long-term loans. They allow consumers to buy more expensive—and profitable—cars. But long loans may keep some people from replacing their cars, cutting into future sales.

I love how THAT is what they are concerned about.

Experts say there is an appetite for more risk because banks see limited downside in auto lending. The delinquency rates on car loans are near record lows, and used car values are at record highs. And if a buyer defaults, the bank can repossess and sell cars with limited losses.

Again, sound familiar?

Melinda Zabritski, director of automotive credit for Experian, said the greater availability of credit is helping the surge in new car sales. The percentage of subprime loans isn’t far below the record level of 2007, and the length of loans is growing, she said.

 

The length of loans has come a long way since Lee Iacocca, then a Ford regional manager, helped pioneer auto loans in the 1950s. He became a management star by developing a ’56 for $56 sales pitch. The idea: consumers could buy a 1956 Ford for 20% down and $56 a month. The loans were paid off in just 36 months.

Yep, we’ve come a long way alright.  All the way to a bankrupt Banana Republic run by insane, immoral and extremely dangerous oligarchs and Central Bankers.

Full article here.

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Wed, 04/10/2013 - 15:47 | 3433173 Ahmeexnal
Ahmeexnal's picture

Auto loans with BTC. Why not?

Wed, 04/10/2013 - 15:51 | 3433213 Cursive
Cursive's picture

@Ahmeexnal

I like this idea.  At least expressed in BTC, the cars are worth half of what they were yesterday.  Sounds fair.  Assuming you didn't own any BTC yesterday.

Wed, 04/10/2013 - 17:10 | 3433739 MagicHandPuppet
MagicHandPuppet's picture

I just had this wonderful idea.  What if we bundled a bunch of these loans together into a "product" that investors could buy shares of?  This would make even more money available for car buyers since it's everyone's right to own a car.  Then, we could have unregulated companies sell a sort of "insurance" in case those investors lost money due to some almost inconceivable hickup in the economy where more than a handful of "car owners" somehow became unable to continue paying their car loan payments.  And, to make sure nothing bad happens, we'll let the gubmint be a back stop so that, even if those insurance policies need to kick in... knowing that these insurance companies don't really have real funds to pay on all the policies all of our connected "friends" have bought - betting against the "car bubble".  This way, all of those corrupt campaign contributors... eh hem vulnerable investors get paid their due share, putting suckers... eh hem, tax payers on the hook.

Wed, 04/10/2013 - 18:24 | 3434062 Dick Buttkiss
Dick Buttkiss's picture

You mean rinse and repeat?  Great idea!

Wed, 04/10/2013 - 17:48 | 3433927 Stuck on Zero
Stuck on Zero's picture

Soon: Repo jobs openings galore.

 

Thu, 04/11/2013 - 07:50 | 3435627 fajensen
fajensen's picture

Once those bonds have been leveraged to 10^9, the "asset" underlying the bonds can never lose value, be written off or indeed be re-possessed and auctioned off. Price discovery hurts "stability" and "confidence". Right now, the best investment is perhaps to buy a piece of really dry desert where all these cars can be stored for the duration of the bonds ;-)

Wed, 04/10/2013 - 15:50 | 3433214 Groundhog Day
Groundhog Day's picture

What are the borrowing costs of bitcoins?  can i get a 1.9% APR loan

Wed, 04/10/2013 - 16:04 | 3433305 resurger
resurger's picture

It's funny how those MSM flipped on BTC, today in the morning i read that BTC has a long long long way up 

Am just wondering how many widows are there now..

BTC is a true reversal of fortune.

Wed, 04/10/2013 - 17:06 | 3433719 stormsailor
stormsailor's picture

well, it looks to me like the sheep got the shit sheared out of them in bitcoin.  but golly-gee-willikers,  its back up to 198.22 as we speak.

 

i know one thing, its been fun to watch.

Wed, 04/10/2013 - 17:41 | 3433898 TraderTimm
TraderTimm's picture

Those of us sitting in the BTC trading channel had a lot of fun trading the swings. This isn't the first time we've had this happen, and I doubt it will be the last. We're swinging back to the 180 - 190's at the moment.

I guess I could sit here and follow the old-man market, but I gave up on Bernanke and his goons a long time ago. Best of luck this coming May.

Wed, 04/10/2013 - 15:48 | 3433181 SolidSnake961
SolidSnake961's picture

bullish, dow 15000 coming by the end of the month??

Wed, 04/10/2013 - 15:50 | 3433220 Groundhog Day
Groundhog Day's picture

End of the month??  Try the end of tomorrow's trading session

Wed, 04/10/2013 - 17:12 | 3433756 rhinoblitzing
rhinoblitzing's picture

Any moar Government Reports to Leak early?

Wed, 04/10/2013 - 16:07 | 3433306 wee-weed up
wee-weed up's picture

Obama gonna buy me a new car...

and let me put it on my EBT card!

Wed, 04/10/2013 - 15:49 | 3433184 LawsofPhysics
LawsofPhysics's picture

The people of the world have gone from chains of iron to chains of debt - "winning" or as they say on CNN, "leaning forward".

Wed, 04/10/2013 - 16:19 | 3433406 centerline
centerline's picture

Course dialed in and set on autopilot.  We are going right into the event horizon.

 

Wed, 04/10/2013 - 21:32 | 3434734 SokPOTUS
SokPOTUS's picture

"Leaning Forward" = "Assume the Position".

We're all in Barry's Bathhouse now.... 

Wed, 04/10/2013 - 15:47 | 3433188 Ancona
Ancona's picture

If you need 97 months to pay off a fucking car, maybe a bycicle is a better choice for you.

Wed, 04/10/2013 - 15:53 | 3433229 angel_of_joy
angel_of_joy's picture

Bycicle loans ? 36 months maybe, for starters ?

Wed, 04/10/2013 - 16:01 | 3433278 SubjectivObject
SubjectivObject's picture

Even better: bysexcicles, so your wife can ride it too.

Peugoet Mixte.

Wed, 04/10/2013 - 16:08 | 3433330 johnQpublic
johnQpublic's picture

well, its easy enuf to spend 10,000 on a good bike

i'd have that tri bike of my dreams if they would just give me a thousand month loan on the thing

Wed, 04/10/2013 - 18:39 | 3434104 12ToothAssassin
12ToothAssassin's picture

Downvote for triathletes. I dont support competitive excercising.

Wed, 04/10/2013 - 16:01 | 3433286 RafterManFMJ
RafterManFMJ's picture

When I can get a 30 year loan for it, I'll buy a new BMW. Maybe something reaaaaal classy that announces to people I've arrived, like a 1-series.

Wed, 04/10/2013 - 16:23 | 3433425 centerline
centerline's picture

Nah, people are just behind the times.  See, you can't live in a bicycle (down by the river).  But, one of those Suburbans...

Plus, it can't get repo'd if keep moving around. And the taxpayers at large will ultimately get the bill.  The "New" American way!

Wed, 04/10/2013 - 17:28 | 3433843 Osmium
Osmium's picture

I think you are on to something there....

Wed, 04/10/2013 - 16:49 | 3433605 Uber Vandal
Uber Vandal's picture

The cash for clunkers program is looking more and more insidious, isn't it?

Destroy fully functional cars, and thier good parts, to raise the price of used cars, and parts, and/or require people to buy new vehicles.

Wed, 04/10/2013 - 17:05 | 3433710 prains
prains's picture

there's not going to be a planet in 97 months, Dark ages a comin bitchezzzz

Wed, 04/10/2013 - 17:30 | 3433847 Excursionist
Excursionist's picture

But.. but.. what about Tamika, the single mother of five?  She needs an LR4 to commute to and fro work, and to deny her the opportunity of financing one with a 97-month loan would be just plain racist!  Someone get the Rainbow Coalition to dispel the hillbilly notions I've been reading here..

Thu, 04/11/2013 - 08:05 | 3435652 backwaterdogs
backwaterdogs's picture

why? if I can get a 97 month loand at 0 to 1%....damn straight I'd finance it.  

with the anticipate value of the dollar in 97 months....seems like a nice little arbitrage, hecky in 97 months, might be able to sell that 8 yr old car for more 'dollars' than you paid

Thu, 04/11/2013 - 12:00 | 3436750 Ace Ventura
Ace Ventura's picture

They'll never give you the 97 month option at those rates. Or if they do, you're going to pay full MSRP before taxes, titles, fees, etc. Now if we go hyperinflationary you might be on to something. BUT, by now you MUST know that if that happens, you won't be able to afford groceries, much less your now 'cheaper' monthly car payment. The automakers don't care, because they can keep charging insane prices like $40-50k for a fucking 4x4 pickup truck (oooo, but its got nav and iphone gadgetry!.....and sheeple will continue to buy as long as they can eeek out that payment every month. The only way this will change is when J6P stops buying $50k pickups or $30k small/midsize cars, regardless of the loan terms.

Thu, 04/11/2013 - 20:06 | 3438899 backwaterdogs
backwaterdogs's picture

Youre probably right...tho, actually I did just buy a new f250, well under retail for 72 mo. at something less than 2%.  Could have paid cash, but bought a couple monster boxes instead...that was 4 months ago...so far it hasn't worked for me too well, but geeze money is cheap

Wed, 04/10/2013 - 15:49 | 3433196 Cdad
Cdad's picture

Deserate status quo...that pretty much sums up what is happening in equity "markets."

Wed, 04/10/2013 - 15:50 | 3433200 Tinky
Tinky's picture

Hey! I thought that my medical records were private! This is worrisome...

http://mtanga.com/Homer5.gif

Wed, 04/10/2013 - 15:50 | 3433206 Dr. Richard Head
Dr. Richard Head's picture

My regional "bank" here in Ohio is offering Car-Equity Lines of Credit, so we've got that going for us.

Wed, 04/10/2013 - 17:12 | 3433750 BooMushroom
BooMushroom's picture

Can I rehypothicate my car? If I get a used car and take out 6 equity loans on it, can I use that new cash to buy a new car? Then I can default on the equity lines, and walk away with the paid-for car?

Winning!

Wed, 04/10/2013 - 15:49 | 3433207 TumblingDice
TumblingDice's picture

Loans make people richer.

Wed, 04/10/2013 - 15:51 | 3433222 Matt
Matt's picture

Everyone knows debt is wealth. At least, everyone with a PhD in Economics from a reputable school.

Wed, 04/10/2013 - 18:41 | 3434107 12ToothAssassin
12ToothAssassin's picture

Money multiplier bitchez

Wed, 04/10/2013 - 15:49 | 3433209 tbd108
tbd108's picture

I bet Homer has a 97 month loan.

Wed, 04/10/2013 - 16:08 | 3433339 johnQpublic
johnQpublic's picture

a friend of mine who is really bad with money just bought a 2005 ford f150 on an 84 month loan

Wed, 04/10/2013 - 16:32 | 3433470 Blano
Blano's picture

An 8 year old truck with a 7 year loan?  Yeah that should work out well.

Wed, 04/10/2013 - 20:21 | 3434360 DosZap
DosZap's picture

a friend of mine who is really bad with money just bought a 2005 ford f150 on an 84 month loan

He must have been taught in Screwell in NEW MATH.

Thu, 04/11/2013 - 12:23 | 3436881 Ace Ventura
Ace Ventura's picture

LOL! But, but, ya'll don't understand! He got it for a great deal! It's only costing him $59.99 a month!!!

 

Wed, 04/10/2013 - 15:51 | 3433217 ebworthen
ebworthen's picture

Hey, why not a 20 year car loan?

C'mon GM, 20 year loan at 0.5% and the car guaranteed bumper-to-bumper for the life of the loan?

Wed, 04/10/2013 - 15:52 | 3433235 tbd108
tbd108's picture

And we know how the "old" GM warranties worked out.

Wed, 04/10/2013 - 16:01 | 3433291 Dr. Richard Head
Dr. Richard Head's picture

That's nothing.  30 years worth of car loans for all of those that rolled their car debt into their mortgage.

Wed, 04/10/2013 - 16:05 | 3433308 ebworthen
ebworthen's picture

I worked with an old-timer back in the 80's, WWII Vet.

He worked for Cadillac for 30 years after the war.  Told me how the management completely fucked the company and employees over.  Lowered quality, pushed quantity over quality, and the final insult was to raid the worker's pensions.

He said that unfortunately he was too old and in ill-health to kill the mother fuckers or he would.

Wed, 04/10/2013 - 16:10 | 3433353 johnQpublic
johnQpublic's picture

have you seen the financing it a piece at a time ads?

 

http://www.youtube.com/watch?v=sIuo0KIqD_E

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