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This Is What Happens When The Government Cracks Down On Subprime Auto Loans

Tyler Durden's picture




 

A running theme here has been the great rotation of bubble-blowing credit from subprime housing to subprime auto-loans. Amid government probes of underwriting standards and soaring delinquencies, it appears when the least-creditworthy Americans are cut off from debt servitude, bad things happen in car sales...

  • *FORD FEB. U.S. LIGHT-VEHICLE SALES FALL 2.0%, EST. UP 5.8% (miss!)
  • *GM FEB. U.S. AUTO SALES UP 4.2%, EST. UP 5.9% (miss!)
  • *NISSAN FEB. U.S. AUTO SALES UP 2.7%, EST. UP 3.8% (miss!)
  • *FIAT CHRYSLER FEB. U.S. AUTO SALES UP 5.6%, EST. UP 8.2% (miss!)
  • *HONDA FEB. U.S. AUTO SALES RISE 5%, EST. UP 11% (miss!)
  • *TOYOTA FEB. U.S. AUTO SALES RISE 13.3%, EST. UP 15%( miss!)

Of course, the real blame - as we will be told - is the weather... It seems Obama's new American Dream of a brand new Ford or GM (or Maserati) in every driveway may be another broken promise.

  • *FORD SAYS WEAK TEXAS SALES MAY HAVE BEEN WEATHER RELATED

So did the analysts that forecast sales not know that there was weather? not know the seasonals in fleet sales?

This won't end well...

 

as the delinquencies are already surging...

 

The details are even worse:

  • *FORD FEB. U.S. F-SERIES SALES DOWN 1.2%
  • *FORD FEB. U.S. ESCAPE SALES DOWN 9.6%
  • *FORD FEB. U.S. FUSION SALES DOWN 4.9%
  • *JAGUAR LAND ROVER CEO SEES 2015/2016 PROFIT MARGIN DECLINING

This really should not be a total surprise as auto sales have fallen and missed for 3 months in a row... to 10-month lows

 

This is the biggest 3 month drop since June 2011 and on par with the drop into Lehman...

 

  • *AUTODATA: FEB. LIGHT VEHICLE SAAR 16.23M UNITS, EST. 16.6M

Even Phil LeBeau could only muster "lacklustre" as a response to this data...

But finally...

  • *LAMBORGHINI CEO SEES HIGHER SALES IN 2015 THAN 2014

We leave you with this...

Sergio Marchionne, chief executive officer of Fiat Chrysler, said in an interview. “Full employment, low interest rates, stock prices up. It’s like dreamland.”

 

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Tue, 03/03/2015 - 16:35 | 5851160 cossack55
cossack55's picture

If you are offering, I'll have the Maserati please.

Tue, 03/03/2015 - 16:44 | 5851203 EmmittFitzhume
EmmittFitzhume's picture

This is what happens Larry.

 

http://youtu.be/DZV_vpkVTNA

Tue, 03/03/2015 - 17:22 | 5851362 johngaltfla
johngaltfla's picture

So what you're saying is the subprime loan application for my new Bugatti Veyron will be declined?

Damn.

Wed, 03/04/2015 - 12:06 | 5854115 de3de8
de3de8's picture

JGfla,
Only because the last of the run (450) "finale edition " sold, will have to wait for new EB model intro.

Tue, 03/03/2015 - 17:24 | 5851371 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

access to new vehicles are a fundemental right 

Tue, 03/03/2015 - 16:35 | 5851163 jiggerjuice
jiggerjuice's picture

So what is the best vehicle to short this disaster. Car companies, or Wells Fargo? 

Tue, 03/03/2015 - 16:41 | 5851180 cowdiddly
cowdiddly's picture

a slightly used Sherman tank.

with zombie pod upgrade

Tue, 03/03/2015 - 16:43 | 5851197 madbraz
madbraz's picture

biotechs - the mother of all bubbles.

Tue, 03/03/2015 - 17:33 | 5851405 DetectiveStern
DetectiveStern's picture

Also the mother of all stock rigging so timing a short is way to risky for those not in the know.

Tue, 03/03/2015 - 16:43 | 5851199 rsnoble
rsnoble's picture

It will be like the rally. Throw a fucking dart and hit pay dirt.  Careful though, this crash will be so big you may never get to cash out and shorts may get 'bailed-in' as punishment. Really, it could happen.

Tue, 03/03/2015 - 17:42 | 5851438 DetectiveStern
DetectiveStern's picture

I'm short on stocks, I have non. My only position is around 4,300 penny stocks in an African farming company with little debt and plenty of cash (not to mention shit loads of cows and land). I figure after the crash and the demise of the west Africa will be set free and could see huge growth.

I've closed all blue chip positions, walked away from currencies and starting to stock up on phyical assets and cash. I'm hoping the fact I'm in the UK will mean my pounds will make it very cheap to relocate to a Euro area country after the EUR collapses. Don't really want to be in the UK when SHTF wrong mentality here need to be somewhere more community spirited like Ireland.

Tue, 03/03/2015 - 18:54 | 5851705 logicalman
logicalman's picture

It has two wheels and pedals.

Tue, 03/03/2015 - 16:36 | 5851165 Theta_Burn
Theta_Burn's picture

I'm in the market for a F250

Prices certainly don't reflect slow sales.

Tue, 03/03/2015 - 16:42 | 5851189 froze25
froze25's picture

Buddy you have to wait till about Sept, Nov, when the dealers and the Manufactures start freaking out about all the metal they still have in the lots.  Thats when the "sales" will happen.

Tue, 03/03/2015 - 17:37 | 5851423 pursueliberty
pursueliberty's picture

November as always been my best month deal wise.  I bought my 14 F250 in Nov 13 for a song, same with the ten it replaced.  With the oil slow down in TX this summer should be a great time to pick up a lightly used one I'd imagine.  Lots of oil workers with $60k trucks last time I was there.

Tue, 03/03/2015 - 22:19 | 5852440 sapioplex
sapioplex's picture

Back when gas shot up over $4.00 a gallon I picked up a no frills F150 for $9k in cash when the lots filled up.  Blue book was over 12K at the time and is still over $10k.  Hand crank windows...keeps one in touch with the asspocalypse headed our way.

Tue, 03/03/2015 - 16:36 | 5851166 El Vaquero
El Vaquero's picture

"Sergio Marchionne, chief executive officer of Fiat Chrysler, said in an interview. “Full employment, low interest rates, stock prices up. It’s like dreamland.”"

 

Full employment, you say?  Funny, I thought that the labor force participation rate dropped.  Fucking wanker.

Tue, 03/03/2015 - 16:41 | 5851185 ZerOhead
ZerOhead's picture

"It’s like dreamland.”

Freddy Kruger dreamland...

Tue, 03/03/2015 - 16:43 | 5851195 froze25
froze25's picture

Yeah and the north east is a "winter wonderland", you can't make this shit up.

Tue, 03/03/2015 - 18:24 | 5851617 pitz
pitz's picture

Full employment for the dealer that sells this man the crack.  That's for sure. 

Tue, 03/03/2015 - 16:36 | 5851170 Sir SpeaksALot
Sir SpeaksALot's picture

Looks like obvious... everything is rigged anyway.

Tue, 03/03/2015 - 16:38 | 5851175 ZerOhead
ZerOhead's picture

We need to find more products to buy with debt or the entire shebang collapses.

A no money down bass boat in every driveway a 0% interest no payments till ever swimming pool in every backyard...

Tue, 03/03/2015 - 16:45 | 5851208 Winston Churchill
Winston Churchill's picture

Sod that, negative interst rate please, self liquidating over the life of the boat.

Tue, 03/03/2015 - 16:45 | 5851210 sodbuster
sodbuster's picture

Don't give that idiot in the WH any ideas- it will be ObamaCar- asshole will want to pass a law you HAVE to buy a new car every other year. Except the free shit army- Theirs will be free through subsidies.

Tue, 03/03/2015 - 18:25 | 5851621 RobD
RobD's picture

After Judge Roberts ruleing there is nothing to stop them from doing that.

Tue, 03/03/2015 - 19:59 | 5851895 pitz
pitz's picture

They already do this in Japan (home of SUKI (tm), The New World Religion (tm)).  Its called Shakken.  Look it up!

Tue, 03/03/2015 - 17:32 | 5851399 Wait What
Wait What's picture

how bout subprime 70 inch TVs in every home?

the more ppl i visit, the more, and bigger, TVs i seem to notice. seems like the next logical step...

that, or, subprime iShit for every man/woman/child on earth

Tue, 03/03/2015 - 18:57 | 5851714 logicalman
logicalman's picture

Drop by my place.

You won't find a single example of the manipulation box.

 

Tue, 03/03/2015 - 19:01 | 5851727 logicalman
logicalman's picture

I've only ever had one new car - mainly due to my (now ex) wife.

Had to shut her up one way or another.

Other than that, I've always saved and paid cash for something not too old that I could afford.

I gave 'em up once they got to the point where I couldn't fix the damn things myself.

 

Tue, 03/03/2015 - 19:22 | 5851788 neidermeyer
neidermeyer's picture

The problem is that not only do you need something to finance but it has to be mass market and expensive to make the magic work... homes and cars are king of the hill ... maybe I can get a no-doc $200,000 education loan to fund an e-trade account with....

Tue, 03/03/2015 - 16:50 | 5851229 Mike Honcho
Mike Honcho's picture

Blaming low car sales on weather is asinine.  It implies that your buyers were poised to invest but didnt like the chill in the air to commit.  Their true and current growing clientele come in and out like the tide, no forethought involved.  Got a paycheck, then commit to 7 years of payments at current budget planning. 

Not sure what these used dealers are planning in the future, but when fixing a car involves an electrician, computer programmer, and wrencher, then those models wont move.

Tue, 03/03/2015 - 16:55 | 5851245 madcows
madcows's picture

so, responsible people buy used vehicles and keep them for many years.

irresponsible people live in section 8 housing, get food stamps, WIC, EBT, etc... and use their "off the books" income to purchase shiny new SUV's.

Tue, 03/03/2015 - 19:07 | 5851748 2handband
2handband's picture

Not the irresponsible. Taking from the system without giving back is one of the best forms of resistance I know. 

Tue, 03/03/2015 - 16:57 | 5851251 madcows
madcows's picture

i thought it was unusually warm and dry out west?  doesn't that include texas?  shouldn't there have been additional vehicle sales given the warm dry weather out west?

Tue, 03/03/2015 - 17:50 | 5851478 cornfritter
cornfritter's picture

I wanna be buried in that grove of pecans down by the creek :-)  Texas is still on some maps, weather chilly and dismal.  The effects of the oil and gas turn down wrt auto sales will be seen in the coming months.  The kids are trying to keep the trucks, but $80K/yr aint the same as $18K (if found) and $800/mo payments + full coverage won't be sustainable.  The banks and stuff will be vacuuming up the unemployment benefits for some time yet, however.

Tue, 03/03/2015 - 16:57 | 5851253 wmbz
wmbz's picture

The majority of car/truck sales are sold to the "how much a month crowd."

Most have no idea as to the total cost of the depreciating appliance that they are in debting themselves for. When a debt based country who's citizens have a lousy understanding of finance it's no suprise. 

Auto dealers love to run corny comercials offering free hot dogs and flat screens. Their customers will flock in to get the "deal" and get it really good!

Tue, 03/03/2015 - 17:01 | 5851271 JRobby
JRobby's picture

Moving target

Overlay the line with the slope (downward) of average FICO scores from '06 through.

Tue, 03/03/2015 - 17:02 | 5851272 Ignatius
Ignatius's picture

40 acres and a mule.

Tue, 03/03/2015 - 17:52 | 5851486 cornfritter
cornfritter's picture

to dream, the impossible dream

Tue, 03/03/2015 - 17:52 | 5851487 TalkToLind
TalkToLind's picture

...and a mule?

Tue, 03/03/2015 - 17:15 | 5851329 Atomizer
Atomizer's picture

Because we will purchase gas guzzlers in cash without the need of a third party banking theft ring. We don’t live on a UK island at the doorstep of 10 Downing Street. Suck up your losses in selling a clown car based on a liter of imported fuel. Or the carbon electrical car who is creating Climate Disruption due to the fact, you need taxpayers monies to build such bullshit infrastructure.

Ring Taxi Nürburgring

We can always take the House, Senate, or Congress for a ride to remind them that they work for us. It’s a hell of a fall, tuck, and roll if that door opens and you fall out!

Why do we employ you, if everything goes through an Executive Order? If Obama bypasses you, what is your purpose under constitutional law? Might be time to take the wind out of his sails.

Tue, 03/03/2015 - 17:36 | 5851419 venturen
venturen's picture

FREE MONEY FOR ALL....beware the deflation.  Wonder why in the history of the world no one thought to print unlimited current and just give it out for free. I guess next year I will learn why it doesn't work!

Tue, 03/03/2015 - 17:50 | 5851477 booboo
booboo's picture

God Dang man, don't use that word "deflation" around here!!

Tue, 03/03/2015 - 17:36 | 5851421 will ling
will ling's picture

"bad things happen to bad people" - NOT APPROVED, NOT APPROVED, NOT APPROVED.

Tue, 03/03/2015 - 18:10 | 5851556 cn13
cn13's picture

31% of auto loans in the U.S. between January-October 2014 were made to subprime borrowers with a credit score under 640.

There are going to be some incredible deals in the secondary car market later this year.

Tue, 03/03/2015 - 18:35 | 5851655 scubapro
scubapro's picture

 

 

at 640 and less is is ONLY a matter of time before the loan defaults.   with longer terms, lenders have a much longer time to be on the hook to lose more money.   the collateral depreciates, by the time month 60 hits, 100% of borrowers default, half want to leave the car somewhere...but by then the loan is still 60% of original amount, but collateral only 20%.   figure roughly 30% of total subprime autodebt will get eaten, but worse 9for the economy) is that no new loans will be made after this starts happening.....defaults start, but then lending REALLY dries up, and sales actually decline rather than growing at a slower rate.    but by that point, SD and ND will be suing drillers for cleanup costs after the leave town.    a little at first, then all at once.   

Tue, 03/03/2015 - 19:07 | 5851738 paulbain
paulbain's picture

----------------------------------

 

 

 

 

 

 

cn13 wrote:

There are going to be some incredible deals in the secondary car market later this year.

 

Yes, cn13, another ZH reader made the same remark on Sunday.  That seems to be the growing consensus here on ZH.  We shall soon see.  And I cannot wait.  I cannot become an Uber driver without a fairly new car.   In order to become an Uber driver, your car cannot be older than a 2008, and my current car is a 2005.

 

Paul D. Bain

PaulBain@PObox.com

 

 

 

 

 

 

 

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Tue, 03/03/2015 - 19:32 | 5851810 neidermeyer
neidermeyer's picture

Lease a new $40,000 minivan and let them have it back in 4 years with 500,000 miles... they can sue you for the approx. $90,000 in mileage overage but they'll settle... OR you could just "adjust" the odometer to 40,000 miles.... that's what dashpro.com is for... 

Tue, 03/03/2015 - 18:36 | 5851658 dlfield
dlfield's picture

They need to add an 84-month term chart, which delays the trade-in cycle due to further lack of equity.

Tue, 03/03/2015 - 18:42 | 5851674 JBilyj
JBilyj's picture

THIS IS WHAT HAPPENS LARRY!

Tue, 03/03/2015 - 19:42 | 5851846 SparticusUK
SparticusUK's picture

THIS IS WHY WE CAN'T HAVE NICE THINGS....

Tue, 03/03/2015 - 18:44 | 5851684 FeralSerf
FeralSerf's picture

A car in every pot and two chickens in every garage.

Tue, 03/03/2015 - 19:56 | 5851885 Bunga Bunga
Bunga Bunga's picture

Don't worry, Wall St goes into subprime housing lending again.

Tue, 03/03/2015 - 20:16 | 5851957 lakecity55
lakecity55's picture

I worked hard, made money, and bought a used Ranger today. I paid cash.

So, I guess I am a dumbass.

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