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Honda US Sales Chief Fears "Stupid" Auto Loans Vicious Cycle
Extended-term loans are "stupid not just for us, but for the industry," exclaimed Honda's US sales chief John Mendel, adding that competitors are doing "stupid thing" to boost auto sales. With delinquency rates surging, it appears he is right to worry, as Bloomberg reports, more than one in four new-car loans in October and November had terms of 73 to 84 months long (more than double that of the previous 08 peak). Honda has said it will avoid longer-term loans even if competitors do note as one economist ranted, "we've seen this movie before, we know how it ends, and it’s not pretty."
A top U.S. executive at Honda said competitors are doing “stupid things” to boost auto sales, including making seven-year-long car loans that harm buyers.
Automakers are increasingly selling vehicles with 84-month loans that reduce monthly payments while making it tougher to repay faster than cars lose value, John Mendel, Honda’s U.S. sales chief, said in an interview. The Tokyo-based company will avoid longer-term loans even as Nissan tries to supplant it as the fifth-biggest automaker in the U.S., he said.
“You’re ringing the bell on a new-car sale, but that customer is saddled -- they’re stretched so thin,” Mendel said at the North American International Auto Show last week. Extended-term loans are “stupid not just for us, but for the industry.”
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“We’ve seen this movie before, we know how it ends, and it’s not pretty,” Webb told reporters at an event before last week’s show. “But I say that it has longer to run, and we have already paid the price of admission. So we might as well stay to the end. You just keep your eyes on the exit door.”
More than one in four new-car loans in October and November were 73 to 84 months long, according to Experian Plc. The share of new-car loans at those term lengths was less then 10 percent in 2009 and 2010.
“It can have some negative impact on the market in creating a vicious cycle of negative equity if the consumer doesn’t hold onto their vehicle long enough,” Melinda Zabritski, senior director of automotive finance for Experian, said by phone. “Something has to be done to keep the market affordable, or consumer buying is going to have to change and we’ll have to return to less frequent purchases.”
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Auto loan delinquency rates are surging to levels not seen since 2008 and stunningly, more than 8.4% of borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November. As even glass-half-full-status-quo-hugger Mark Zandi is forced to admit, "It’s clear that credit quality is eroding now, and pretty quickly."
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Well it could be worse, those loans could've been in swissies..
...with a 2nd mortage on the 'SPOILERS' in the back & the spinnin rims.
My most recent car cost more than my very first house.
The problem for many folks though, is that their wages haven’t inflated in proportion to home and car prices.
The low interest rates and monthly payments have allowed them to live in houses and drive cars that they should not be able to afford.
This will not end well.
A car is almost as good an investment as a house.
Especially if it's a van with good tires and capable of safely driving in the mud down by the river.
yup. and you will need that great van with great tires if you haven't got a paddle.
How many houses can go down the highway at 65mph?
Exactly...it's not only home and car prices...it's energy as well:
http://ourfiniteworld.com/2015/01/06/oil-and-the-economy-where-are-we-he...
Starting to see the repo man out there.
It looks like the cars are being cut off in mid-drive.
Then the flat bed and the cops show up.
Game over.
Clever, huh ? GPS kill switch is actually a title lender's handywork.....but soon to be standard equipment in all dealer-financed vehicles.
Maybe in all vehicles and that's kinda creepy.
OK, just how stupid cen we be? Where is the bottom of this pit?
You've heard of Einstein? Wise man.
Except, he got married, so even the wise have their limits.
Twice. Dumped his first wife, who helped him with math, to marry his cousin. What does that tell you?
That tells me he had no game.
It tells me his covetous cousin had a plan: "Opportunity is where you find it or make it." It worked for her.
We're gonna keep digging until we find the bottom...
Get James Cameron on it!
https://www.youtube.com/watch?v=HIC22gQfh6E
Modern economic policy: “We’re just going to keep digging deeper until we are out of this hole”.
China?
My names Pit and your ass ain't talking your way out of this shit.
I think I will get a large raise this year, so it makes perfect sense to go spend the raise before I receive it.....
Hey, look Squirrel....
The trend to extend is the beginning of the end!! Harley Davidson started this crap many years ago financing their motorcycles for 15 years. Hell everyone in america has 0 down and $120 a month!
Extrapolating this trend, it means a shift from Owning to Renting.
The Rentier Society. It's what TPTB want. Perpetual Freedom for perpetual debt.
Get a haircut and get a real job.
And buy a car...
These aren't car loans... they're mortgages.
That's why the only new I will ever buy is a Mercedes Sprinter.
It's the length I payed for my starter in full.
Insane.
But, but... I thought that paying the money back wasn't the intention at all... It really should be named 'strangle people to pour money into the economy out of nothing'-loans
New American cars appreciate over time. Cars bought now with no money down, no interest and payment plans for up to 96 months can be flipped back into the car market at a higher value. At that time, the Dollar value will have been halved. Who is smart now, huh?
In Europe, yes, but who do you have to know to get them in?
But Chevy says if I have $1 to put down and make $250 a week, I am guaranteed a new car. How else are they going to sell cars if they can't offer 96 month loans?
Honda has other problems to worry about anyway. Like severe QC problems at Marysville. If I was a 1%er I would be worried about buying a new NSX. Of course those will probably be hand built buy the few quality workers left at the plant leaving the Accords to be built by complete imbeciles.
A car should be looked at like the appliance that it is, a mode of transportation that depreciates at a rapid clip.
Far to many folks consider them status symbols, nothing new I know, and well promoted by the auto industry.
There is an endless amount of people more than willing to spend money they don't have to buy something they can not afford.
Great if you are selling cars... As always now is the best time to buy!
I don't own any but I do ride bus. Doesn't size matter?
Just buy used. Let the 1st owner run it in and have all the niggles fixed.
Took a taxi home the other day. They use Mercedes E classes as taxis here. It was a recent model (2013) and had 300,000 miles on the clock. Looked and drove like new.
Will our fiat paper even last 84 months?
I'm not surprised. The new Acura's look like " Kindercare Milk Boxes".
Just wait until you hear about the government bailout of under water car loans....the people didnt know what they were signing up for...the nasty bankers shoved this on them.....and here we go again....save the jobs...save GM...
You didn't sign that.
+1 at ya. Some lines get old and tired. The "you didn't..." could live forever.
Hey gas is low and interest is low how about a 30 year arm on a Cadillac escalade? Obumerang is going to promise glorious prosperity to the middle class on the backs of the1% tonight. You in?
John is actually similar to his long lost Austrian relative, except John is meddling in the science of stupidity.
My scientific studies have afforded me great gratification; and I am convinced that it will not be long before the whole world acknowledges the results of my work.
- Gregor Mendel
Oh and of course at the bottom of this page is a"bad credit?" Get a new car anyway banner.....
The collateral has wheels this time.
There is no collateral. A 50% value drop the instant it exits the dealership.
Course, the money was magic'd from nothing so the only loser in the picture is the original buyer.
I just leased a new Cl 550. This is the 4th generation CL coupe. What a nice drive. Look at the asethetics of this car.
I'm going to drive a Chevy instead.
Really, most new cars are FAR too expensive! This stupid easy credit is a big part of the reason why. Many new SUVs cost nearly half as much as some HOMES! (that's insane) They can charge that much because people buy them, due to the formerly mentioned stupid easy credit.
Also, I believe there are large barriers to entering the market, so there isn't much competition between manufacturers. Can't forget the union influence either....
One of the reasons they're so expensive is the massive amount of multi-departmental Government Regulations on everything from emissions to crash testing to CAFE fuel economy standards that are imposed on the automotive manufacturers. You now have twenty five air bags in a car to cocoon you in some kind of wunder bubble should you encounter a moving or non-moving object. And don't forget the technology that's demanded by the consumer as well. I don't even think you can buy a car with roll up windows and a stick shift anymore. Sheesh! My next car is going to be a 1964 Chevy Nova wagon, with the 250 CID six banger, fuel injection and a 700R4 transmission.
Cool, soon I should be able to get a used pickup cheaper for cash.
can refinance loans be far behind ,or pull your hard earned equity out of that Chrysler Cordoba
Unsecured Cordoba Improvement Loans (because daddy needs a new set of spinny rims).
Ever heard of Supply-Demand?
Used cars are now more expensive than they should be, because there are more poor people competing for them.
And the Dealer margins for them are HUGE. Do your due diligence and use math, not emotion or dogma.
I get letters every month from various parties, including the local Ford Dealership wanting my 2006 Ford Focus wagon as a used car trade in. Heck, that was the last car I purchased new and serves well as my 'Bitch' car. They wouldn't want it though. It got invaded by field mice (again!). I don't know how the fuck they got in there, but the last time, they were eating the Power Bars in the glove box and the leftover fast food on the floor. I couldn't get rid of them last Spring, so I started giving them water, but then last Summer they (or it) died and I couldn't find the mouse body, so the car stank of dead mouse. Man, that was tough to get used to at first, but then I figured that soon enough, the body would dessicate and dry out and eventually be mummified. That took awhile and my Shop partner purchased one of those car fresheners disguised as a blue cardboard tree, professing to smell of a new car. That did help out, somewhat, but recently, another mouse had taken residence and last Saturday, I did my annual car interior emptying out and found a ton of nesting material under the rear seat. Well, after removing that, I went to the local self-serve car wash and spent $5 on one of those vacuum cleaners that moves a thousand cubic feet of air a minute. It howled like a 737 engine as I tried my best to eliminate the nesting material and tons of little dark pellets left behind. I've now got a dry cough that won't go away. Not sure if I caught the Hanta virus or if it's a past abestos exposure from my USMC days and working in aerospace around ancient hangars from the fifties. Or it could be the metal flake from the Lowrider guys painting their cars next door. It is almost as bad as chemtrails, but it's not Nano. You can see clouds of metallic sparkles made of aluminum floating by. I hate when they do that and my old Corvette Stingray is parked out there, as it doesn't need any more patina, than it's already got. Cough.
Another perrenial poke in the financial eye from the auto retail sector
that pumps and dumps subprime auto loans off onto the taxpayer. What with subprime Student Loans and subprime auto it should not be long before the two combine to add to American economic abyss.
Definition of STUPID: extended duration loan on a Depreciating asset
Did everyone see that awesome TV on Amazon that only cost $119K?
http://www.amazon.com/dp/B00L403O8U/ref=pdp_new_dp_review
I just love living in Obamamerica. No Job, but I get Obamafood, have an Obamaphone, and you all pay for my Obamacare! Soon I can get free ObamaTV, ObamaInternet, and ObamaCollege. All you dumb arses workin!!
Sorry would post more but I'm off for another free ObamaAbortion for my ObamaBabe, and tomorrow I start my free ObamaSexChange!
More likely you are an angry oligarch, so blinded by ideology that you don't know he's good for you.
The way the economy is going at the minute, with the continued labour participation rate falling and the job creation falling to mere part time work and half arsed full time work, imagine having a 7 year noose around your neck when the trend of the economy isnt exactly your friend.
Defaults galore is whats on the agenda.