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Car Repos Soar 70% As Auto Subprime Bubble Pops; "It's Contained" Promises Fed
While on the surface the US economy has been chugging along from GDP-crashing "snow in the winter" to GDP-cratering "warmer|cooler than expected weather in the spring|summer|fall", with bouts of GDP-boosting inventory accumulation inbetween, in recent months two very disturbing trends about that all important dynamo behind the economy, the US consumer, have emerged.
On one hand we wrote three weeks ago that a "shocking" 77 million, or one third, of Americans face debt collectiors: a statistic which crushes any suggestion that US household credit is substantially improving based on trends in 30, 60, or 90-day delinquency, as it means that the real pain is not at the near-end of the default/delinquency timetable, but the far end, which incidentally has just as dire an impact on one's credit score as a plain vanilla default (and explains why none other than Fair Issac has jumped in to "adjust" its credit methodology to artificially boost FICO scores of these millions of Americans).
On the other hand, we have been closely following the ongoing deterioration of the car subprime loan bubble: something that both Bloomberg and the Fed have both also been paying close attention to recently, yet a bubble which nobody wants to burst, because as we wrote several days ago, it is none other than the subprime car loan bubble that allowed car production to surge the most last month since Obama's Cash for Clunkers capital misallocation program, in the process lifting overall manufacturing and Industrial Production, and thus GDP.
Earlier today Experian released its latest, Q2, metrics that tie these two very worrying trends together, namely the trend in delinquencies, defaults and repossessions.
As NBC summarizes: "The repo man is getting very busy as a growing number of car and truck owners are struggling to make their monthly auto loan payments. Experian, which analyses millions of auto loans, said Wednesday that the percentage of those loans that were delinquent or ended up in default with the vehicle being repossessed surged in the second quarter of this year."
Hyperbole? Hardly. In fact, the auto loan subprime bubble may be the latest to burst (after student loans) as the rate of car repossessions jumped 70.2 percent in the second quarter, with much of that increase coming from finance companies not run by automakers, banks or credit unions. The good news: the percentage of auto loans that end in default is just 0.62% of all auto loans. However, as everyone but the Fed knows, what matters is the flow, not the stock, and the direction and acceleration in defaults simply means that the maximum saturation point has been reached and going forward lenders will experience ever greater losses, which in turn will limit their willingness to offer subprime loans to US consumers desperate to find a house (because clearly one doesn't need to home when one can sleep in their Chevy Tahoe).
Experian also reported that the 30-day delinquency rate was up 0.2 percent and the 60-day rate rose 7 percent in the quarter. "We're starting to see a slight uptick in the number of consumers struggling to make their automotive payments on time; however, we have to keep in mind that these percentages are still extremely low," said Melinda Zabritski, senior director of automotive finance for Experian Automotive.
A chart of the Y/Y change in 60-day delinquency rates as of Q1:
Zabritski added via CNBC that "The number of delinquencies and repossessions rising is what we would expect as the auto industry sells more vehicles," "But this slight uptick is one to keep an eye on." The surge in delinquencies and repossessions is being driven primarily by borrowers with subprime and deep subprime credit scores.
The main reason to keep an eye on this "slight uptick" is that the underlying notional of total auto loan balances just hit a new all time high: in the second quarter climbed 11.7 percent to an all-time high of $839 billion, according to Experian. It doesn't take much of a deterioration in payment terms and credit quality before bad loans surge when the underlying debt is hitting record notionals quarter after quarter.
Some data: the average charge-off was $8,149 in the second quarter up $932 compared to the same period of 2013, and rapidly rising.
Of course, it wouldn't be a CNBC report if it didn't end on a positive note:
Zabritski knows many people are worried the industry is creating a financial storm that will end badly, but she says subprime sales are still far below normal.
"The growth in subprime auto loans looks dramatic because it was so restricted in the last few years," she said. "But this is not mismanaged, rapid growth. We are still well below levels we saw during the recession."
Because somehow one can compare a period in which the Fed has a $4.4 trillion in balance sheet leverage with a period in which... it doesn't? Good to know then that at least consumer subprime lending is not as bad as it was then, and instead all of the Fed's proceeds have simply made their way into the bubble of a stock market.
Finally, for the curious, here are some charts from the most recent, Q1, Experian presentation on the matter. We will update these once the latest slides are unveiled by the credit company.
The average credit score on top leased models:
The average loan vs lease payment for the top 10 most popular car models.
The top New loan lenders:
And the top Used loan lenders:
But the one reason we know the subprime auto loan bubble has burst and is about to lead to another round of devastation around the nation is one simple statement: "The New York Fed dove into lending data, and its economists found that the bubble fears may be misplaced." In other words, it is "contained."
Hm... where have we heard that before?
* * *
Don't worry though - it's not as bas as the peak of the recession!!!
"Not being as bad yet as the last bubble peak" = the new normal. pic.twitter.com/fi9bUUjKdH
— Rudolf E. Havenstein (@RudyHavenstein) August 20, 2014
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Not entirely- somebodys' driving the McPorche SUV to the day job before their pilot carts them off and away on their private jet.
Prius?
so is this the repo (repurchase agreement) or the repo (take away what I couldn't afford to begin with)
which one yellen?
the 200p yellen spew should be entertaining - Orville? Get me some redenbacher!!!
Quick, ship them over to Iraq and let ISIS "steal" them.
That way the auto companies can ramp up production, although I'm not sure they ever quit.
Short GEICO?
speaking about GEICO, and insurance, how mucxh do we pay for uninsured motorists insurance? And who are the uninsured motorists?
(yes, I know) .
In my state that's added a whole new definition to hit and run. You can easily figure out who is low-income and undocumented immediately after an accident when the open the doors and run away rather than exchange information and wait for the police.
Seek,
I saw this several years ago at a bar. Sitting outside, guy in a high end Benz convertable stopped on the street. BOOOOM! A late model Honda rear ends him, and totals both cars. Benz driver gets out, and looks, and starts asking the guy, very politely, "Are you OK man?" Guy in the Honda gets out of the car, in front of a good crowd, looks at everyone, and just books off running! Everyone was so shocked that this dude ran for it, that no one thought to run after him. Police found the car had not real title, and stolen plates, being driving around by a hispanic cook. Make sure you have FULL uninsured motorist coverage, it really counts.....
Explain this though seek.
Just got a car insurance renewal notice for the vehicle I keep in the UK.
350 pounds a year(530 dollars) fully comprehensive including UM, and on a million
pounds risk.
My father recently had to get a new roof on his house. Hired a reputible company. They of course do use some subtract labor.
Well, three trucks showed up but were not allowed past the gates to his community because among the three trucks only 1 had someone with a driver's license.
You just know there is a good chance the tags are bogus. And if the tags are bogus, so is the insurance.
Not unusual anymore.
Wait till we get driverless cars...the whole 'who has liability?' discussion should be interesting...
Do this inclued construction equipment?
Sub-prime loans on equipment
u-bet
Off topic
http://www.huffingtonpost.com/2014/08/19/value-100-dollars-each-state_n_...
How far can you stretch a buck? It totally depends on where you live.
The map below, created by nonprofit research organization Tax Foundation using data from the Bureau of Economic Analysis, shows the real value of $100 adjusted to reflect average price levels in each state. In Mississippi, for instance, $100 would be enough to buy what would cost $115.74 in a place where prices are closer to the national average. In a pricey state like New York, $100 is only worth about $86.66.
...
The BEA originally calculated these values based on what are called "regional price parities," which measure differences in prices for goods and services between regions. The data also reflects the BEA’s Personal Consumption Expenditure price index, which tracks changes in average national prices over time.
The wide range between states is in part due to the number of large cities in each state.
"As people gather into densely-packed cities, the price of real estate in those cities rises as people and businesses compete for ownership of scarce land," Alan M. Cole, an economist at the Tax Foundation, wrote in an email to The Huffington Post.
States on the Gulf Coast or the Mississippi River tend to be cheaper places to live because it's easy to ship goods there, Cole said. States that are more isolated from transportation networks, like Alaska and Hawaii, have to pay more to import goods, so things generally cost more.
Cole argues that the U.S. often overlooks these regional differences in purchasing power when designing tax and welfare policy.
"This data highlights the problems of basing federal policy on nominal income data alone," Cole said. "Income data without context is a poor measure of people’s well-being."
You are correct. It was off topic.
I recommend everyone to take as many loans as you can and stack as much "metal" as you can. Then part it out and buy gold and silver.
GOD BLESS AMERICA
I like how the average lessee of the VW Jetta underperforms his counterparts in cheaper cars...
The lease / loan difference on the Altima also stuck out at me
Jetta lease = college girls
They said sign and drive at the dealership, so people did - the dealer left out the part about paying for it, so people didn't.
This behaviour is actually encouraged at the dealer -- with a minor tweak, they make it very clear they need to made the first payment. My brother works in the industry and was told that apparently after the first payment it's no longer the dealer's problem. There were sales guys at one dealer that had sold 4-5 cars to the same person with every car repo'd; they didn't care because they got paid the same, the dealer got the car off the books, etc. Eventually it's a bank's problem, but I'm pretty sure they're incentivised to make these loans as well. Rest assured it will somehow turn into a taxpayer problem and no one else's.
Widespread criminality.
Bankster culture (envy) spreading like a cancer. Terminal at this point. Patient on life support.
Pull the poor bastard off. Let it go. let it all go.
I was wondering where my car went this morning
LOL, when the loans blow up who insured them?
Maybe Obama can offer Auto Affordable Refinance Program.
The deadbeats can drive them to the chop shops (good parts resource) or drive them into the ocean.
AARP?
Why yes!
Fuck those parasitic cunts at AARP
Bernanke saying there is no housing bubble:
http://www.youtube.com/watch?v=INmqvibv4UU
Remember; the job of the FED is to reward Wall Street and punish Main Street. This is why they LIE.
Wonder when the cash for repos plan starts?
If the Repo-Peep happens to be dark skinned, is a warning shot necessary?
Wouldnt it make more sense to just repo the tires? Or even just one? Im smelling a business op here!
When I was at the auto dealer for routine maintenance, I saw a big brand new diesel (something or other - don't know the make) up on a repo company's tow truck come in. No wheels/tires. I listened in on the conversation and found out the former owner took off his oversized rims and tires before it got repoed. (He probably financed those separately). I did wonder how they got the thing up on the tow bed without any wheels.
"Recovery Summer"
When was that said? 2010?
when the cars are repo'd, they go to auctioneers (great business but I think they are all private-they don't need no stinking investors cash)-
the auctioneer charges a fee to sell to both buyer and seller and they charge the seller a feee to detail the car and fix what has to be fixed to be ablle to sell it.
Betcha there is a nice mark up on detailing and repair.
Then they sock the one who got repo'd a "deficiency balance," which I am sure the financial parasites (lenders) manipulate to their best advantage. After all, who will challenge it and how could they?
The Federal Reserve should have just written a check to the car makers.
That's basically what happened at the end of the day.
The Comedian says it's a joke, and I agree with him.
Sure, but keeping the process going is what's important. If they just gave the money to the car makers they wouldn't even need to make the cars, they'd be like banks.
I don't see the difference between government and business anymore.
So....just *maybe* we can expect a drop in the price of used vehicles?
Student loan bubble popped? Nah. The pin is pushing on it. And there are signs of stress. But, it has not popped yet.
I think that might be THEE last bubble to pop. It's got some of the most subtle bullshit attached to it. Everybody's above average children NEED to go to college. If they don't, they DEFINITELY aren't above-average. When the above-average children bullshit stops, the US world might end.
I gave my above average son 150k and told him to either go to college or start a business. He thought about it and started a business. Was accepted at Princeton, by the way.
Yeah, the skin on the government's teat is thick.
Are car loans full recourse?
Crown Vic was the best car ford ever made
I think that depends on whether you were in the front seat or back seat.
Nope. The '56-57 T-Bird,and '66 Mustang. Second place goes to the '59 Edsel, and third goes to the Pinto.
http://www.themustangnews.com/content/wp-content/uploads/2010/03/343.1.jpg
http://upload.wikimedia.org/wikipedia/commons/1/1c/T-bird.jpg
http://img.photobucket.com/albums/v140/DerrickJB/Cars/1971-Ford-Other-fo...
http://static.cargurus.com/images/site/2008/04/24/19/48/1958_edsel_range...
Don't get even, get MADDD (Mothers Against Delinquent Debt Drivers)
Good thing pension funds don't invest in instruments backed by this sort of thing.
YET
In the neverending hunt for yield, strange things happen....
10-year car loans should solve this problem.
/s
Instead, how about a lease with no-doc and no down payment? Calling Barry.... do it before the Nov election so all folks in the hood can apply. Nice rides like Teslas, BMWs, Mecedes, Rolls, etc.
It's a job creation strategy. We can all get jobs repossessing each other's cars.
Long PRAA.
There's booming business in deadbeat Americans and Europeans.
Portfolio costs are too high.
Too much debt.
No dividend.
NM number one! That shows how stupid banks are...namely Santander! No wonder they are in serious trouble...
See, here in NM, you never keep the car where the loan app says you live. Then we have the REZ where addressess are not kept. Well, they are kept, but no tax records, no real street signs and they are not fond of repo men.
We like guns here in NM as well and have no problem using them on anything that moves. That is if we are not too drunk or drugged to shoot straight. It is hard to shoot from a moving vehicle when you have had ten drinks or so...
Death, by law, to the banksters.
The root cause of all this is these people cannot afford to buy a car. Yet they're able to finance. This is no different than users of high-risk credit card users. The bank/car finance's only interest is to collect(high) interest on a depreciating asset for as long as possible; then reprossess this asset and distribute it again, collecting interest.
Food for thought: think of how many cars would sell if the buyer HAD to put 100% cash down.
My grandfather was a car salesman for 53 years (retired due to health issues at 83). He almost never had a person pay flat-out cash for a car. I recall only one instance when I was young where someone came in with $100-bills and bought a new car. My grandfather took it home with him because he didn't want that much money lying around a dealership. At the same time, he almost never had anyone default on a load either. I think lending standards were higher back then (and people were wealthier).
Bring $100s to buy a new car now. The FBI will be giving you a courtesy call.
Reset the currency. Cancel all mortgages, auto loans, and student loans. Issue all an ObamaPhone, iturd, and ipod loaded with Bieber.
Boooooyyyyaaaahhhhhhh!
Let's just cut to the chase huh? Oh, and BTFWTF
LMAO can't wait to buy a "used" 2014 Challenger for 10,000 ^^ . . .
Contained like Ebola or contained like radiation in Fukishema?
Subprime student loans and car loans should be reviewed on Z/H more often IMHO. It is interesting to note that Wells fargo is now involved in subprime whereas they were not involved in subprime home loans compared to the other TBTF banks back in 2008. Clearly, Wells fargo
is looking for yield just as Goldman Sachs et al are. The clock is ticking on TBTF.
Great, more repo shows on TV and more speeding tow trucks on the road.
Fuck you subprime loans!
I just wait for my inlaws to pass a car down to me because they feel sorry that I drive a much older car then them. Last year I just sold my 1999 Dodge Caravan for $750 which just turned over 300k on the original engine (don't ask me how that happened but it was a factory order that we had bought used and it had the bigger engine). I was then given a 2000 Ford Explorer with 168k on it. It runs great and I finally got out of driving a minivan. It only cost me $82 in FN taxes. I still had to pay tax even though it was given to me. I will never buy a new car. I also get TVs that way too. I did also by a very nice Toshiba 40" flat screen at a yard sale for $200. I am slowly working my way out of the system.
And just wait until all of these repos start hitting the used car lots--Can you say negative-reinforcing cycle?!
An American, not US subject.
Yeah cant wait for repo man series!
I was finally able to sell my used car after two weeks of looking for a buyer. The guy who is purchasing it is doing it with a car loan from his bank. I was expecting cash like I've done in the past, but for whatever reason it appears most people can't raise $17k in cash these days. $85 billion per month from the printing presses would make you think someone might have cash.
Nope.
IF you don't know who has been given a quadrillion in newly minted FRNs, then you haven't been paying attention. SOMEONEs DO have the cash. They're in St.Bart's right now on their yachts, with their showgirl mistresses, or gay boyfriends in Greece, on the Aegean.
I was just kidding. I know that money is basically in complex financial products. It's disgraceful.
Nothing complex about the Bernank, and now J Yell booting up their Laptop, or Ipad 4g, going to Goldman Sucks checking account and creditring it with, oh, say a hundred billion this month.
The only thing simpler is the heretofore abstaining bride, opening a groom's fly on his wedding night.
Jeez dude, you should have mortgaged that car to "raise some cash".
To quote the TV ad I heard: all you need to have is the Title and bring it in and we'll give you the cash you need, right now!
We had a neighbor that sold their old, high-mileage mini van. The people took out a freakin loan. I can't imagine the deal was more than $2,000. This was before the "Global Financial Crisis".
Factoring Recalls and Repo’s – why all the traffic out here in these streets?
A repossessed Mercedes being towed from the garage of every foreclosed house in America. Long auctioneers.
On the front end we subsidize the buses which these deadbeats should be riding and…. On the back we get forced into bailing out the banks who loaned these people money.
The kicker, the auto-workers pensions are being funded based on this charade so we’ll get to bail them out again too.
My TBTF Financial INNNNNNNN-STITUT-IONNNNNNNNnnnnnn is still doin' auto-loans like "gang busters" !
Gang Busters (TV Series 1952– ) - IMDbAh ... the good ole days
Expect obama to forgive car loan dilinquencies, as everyone, even poor people, have a RIGHT to drive.
Ability to repay, or pass a driving test, be damned.
No, Obama won't do that because my TBTF Financian INNNNNNNNNNNNNN-STITUUUU-shuNNNNNNnnnn wouldn't like it.
We'll take some some more loot for the auto-loans tho. Then we'll be able to make more auto-loans.
Where can I get a car equity loan?
Good thing I pay cash for a new car.
However, you can expect local credit unions to also become used-car lots!
Bullish!
http://www.gizmag.com/osvehicle-open-source-tabby/30679/
Convert it to use natural gas also and you can fuel it up off your gas line or turn your house into a fueling station if you have natural gas heat.
3D printers bitchez. The world is changing it is going to be the new tool for the self sufficient to build many things you'd have to pay for expense commercial manufacturing processes at the moment.
I bought a new car, but I needed to. I put 25k+ miles on my car a year for my job. My previous car hit 150k miles and needed new suspension parts, the amplifier for the stereo lost two channels, and the clutch was going. Sure putting $6,000 into it was cheaper than buying a new car, but the next 100k miles would definitely bring more costly repairs. The engine was still going strong, but it was far out of warranty. Plus I drive through the middle of PA on 80 twice a month, not where you want to break down.
I decided that if I was going to get a new car, I'd make a crazy offer and see if a dealer would take it. I got a 2014 model for $6k off sticker, plus $6k for my old car. Walked away paying a little over $14k for a brand new car including tax and fees.
For me that was a good deal and I paid less for the new car than what a three year old used of the same model lists for.
I doubt the dealer cared about what he sold the car to me for when there were plenty of other people signing up for sticker price payments. I just helped him hit his numbers at the end of the month.
ZERO down, 60 month financing, 30% depreciation after 20 months... What could go wrong
I would hope you didn't buy another of the same car you just traded in. 6 years even at 150k miles isn't really much for new cars these days.
Cars that are sold with 0% or dealer has a lot of you can do the deal but not when they are selling well...
Many of the new cars hitting the road are really leases which show up as a sale, and many of them may be motivated because an automobile owner faced with a costly repair doesn't have money to put into their current vehicle. This allows someone in a weak financial position, such as those living on disability or student loans, to put themselves into an ego boosting vehicle that they cannot in reality afford, or need.
I contend that super low artificial interest rates are making much of this possible. If I'm correct, much of the idea of "so called pent up demand" is secondary. It should be noted even with surging sales US auto companies are "hyper boosting" the economy by producing more cars than are being sold causing inventories to build. More below on the subject of a shift in consumer spending that hints of problems ahead.
http://brucewilds.blogspot.com/2014/05/consumption-of-autos-healthcare-a...
If Obama had a son it would be an Edsel.
Nope, It would be just another fucking Kenyan monkey
WFC and F not participating in the recent market recovery:
http://stockcharts.com/h-sc/ui?s=WFC&p=D&b=5&g=0&id=p30875140731
http://stockcharts.com/h-sc/ui?s=F&p=D&b=5&g=0&id=p30875140731
Exponential decay is a bitch. ROFL
Passed a local "low income" housing development and
out of the 8 cars outside, 3 were new Escalades. God
bless America
I can't help it. I have to share this, just to get it off my mind, after reading this thread. This is as much about relationship, as it is with cars.
I owned an operated an auto repair for 20 years. Started at a dealership at age 16 washing cars. Today I build. If I can't fix it, it's done. If I can't build it, it can't be be built. Just sayin. And I invested dearly for those skills.
I drive a paid for f250 diesel, with 177,000 miles. Just replaced the oil cooler in my garage at home. Saved $1500 doing it myself . My runaround is a 2000 Suby, loaded, 150,000 miles. Paid 300 bucks, with front end damage. Rebuilt the heads,t belts,blah, blah...body work. Like new.
I work 6-7 days a week, 10 hours a day. To make ends meet.i know, I'm an asshole or fucked up. I'm constantly reminded.
The wife. Stays at home. Collects a check. Another story. FSA private.
Her Last car was a 2006 Grand Cherokee. Perfect shape.paid for. Just tuned it, full maintenance, and four new hoops for $900.
Wife, without sharing this, trades in the Cherokee for $5000. Puts down $5000 cash,( she managed to save from FSA check) and buy a Honda CRV , sales price about $24000. I can't get a straight answer. It sits in the driveway 4-5 days a week. She doesn't work. Payment is $500+ a month! plus upgraded insurance, which, because it's my responsibility, I have to pay.
I have been married for 31 years. I bear responsibility for the situation also I suppose. I'm not tossing the dimwit. It's cheaper to keep her.
It just exemplifies the fucked up mentality of people in this country today.
Oh, full disclosure. I'm a boring piece of shit who only WANTS to work and I'm no fun.
I feel better now. And I'm late for work.
Obama will tell you that you didn't build that. Eric Holder will tell you he was racially profiled.
Sorry for your problems, keep your chin up out of dignity.
GPS cross hairs locate automobile. Honk, honk, honk. Mrs Jones runs outside to investigate why the car horn is going off. Meanwhile, The next door neighbor Mr. Smith is picking up the morning newspaper.
Mrs Jones screams, someone has broken into my car! Mr. Smith states; no one broke into your car, you are behind in payments. The Bankers have been trying to contact you.
Funny quick one. I was 18 yo, about. Writing service at a dealer. Folks would line up in the shop, and out the door, and I would go down the line with a clipboard. Good old days. Then techs, or me, would park the car outside, and hang the key.
I walk back in, from parking one, and a 280z is gone, and no key. I ask, yell out, who parked it? No answer. I start looking. Car is gone. After about a minute, I start to freak a little. About this time, an old wholesaler walks over, and says calm down. He says, " call the guy, and ask him when he made his last payment" .
You gotta be shitin me. The re popper walked in, and drove the car away!
That was a day.
Good story, thanks for sharing.
Cmon janet 0 down 0 pic a pay deferred payments 12% rates on cars, homes, and hamburger.
PRINT THAT STOCK MARKET UP YOU BI**CH
I need to sell juicy calls.
My wife made me buy her a new truck 2002, before that 1983 was my last new vehicle. Only buy real estate with the banks money.
91 chevy 03 chevy & 02 Ford no foreign