Desperately Seeking: Subprime Collateral

Tyler Durden's picture


UPDATE: Added Santelli carefully negotiating LeBeau's awesome optimism.

Like everywhere else, quality collateral is increasingly being soaked away and nowhere is this more evident than in the auto industry. We recently noted the significance of the auto industry and its self-fulfilling (and destroying) channel-stuffing 'mandates' around the world but today we get confirmation of the depths the car industry will stoop to. Via Subprime News, we see that Preferred Automobile Credit Co. (PACCO) is 'expanding' both the age and mileage limits of vehicles eligible for collateral, as "the pool of quality used cars has been shrinking, making it more challenging for dealers to find quality inventory". Of course, any 'knock' on the risk management or honesty or sustainability of an auto industry so much a part of the US recovery would not be complete without CNBC's Phil LeBeau's rebuff that the entire industry sees things as golden (in all its rear-view mirror glory) - we wonder what subprime lenders were saying about the environment for loans in 2006? And of course they can carry that 20% interest-rate, car prices never go down right?


and this from BBG earlier:

Preferred Automobile Credit Co. (PACCO) expanded age, mileage limits of vehicles eligible for financing, reports.


Increased allowable age of eligible cars, SUVs, trucks from 8-10 years, max allowable mileage from 115k to 130k miles


"In recent years, pool of “quality used cars has been shrinking,” making it challenging for dealers to find     quality inventory": PACCO president CJ Zaruba


[even subprime collateral is running out!!!]


"At the same time, we've found that older model year and higher mileage vehicles, when purchased from quality dealers, pose no greater collateral risk to PACCO. The industry is changing, and we are changing with it," Zaruba continued.


And Santelli carefully negotiating LeBeau's awesomeness...

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Tue, 08/07/2012 - 12:00 | 2684909 q99x2
q99x2's picture

Wrecking yard repos.

Tue, 08/07/2012 - 12:09 | 2684943 glenlloyd
glenlloyd's picture

Financing for insurance auction vehicles (read salvage title) will be next.

Tue, 08/07/2012 - 12:28 | 2685019 NotApplicable
NotApplicable's picture

My guess is that the definition of a "used" car will evolve to include the oldest, never driven, channel-stuffed vehicles.

I wonder how long they can sit in a parking lot before spoiling?

Tue, 08/07/2012 - 13:25 | 2685162 Enceladus
Tue, 08/07/2012 - 13:38 | 2685193 pursueliberty
pursueliberty's picture

Go long tire companies.


My last F250 had to have the tires replaced a week after I purchased it due to flat spotting on the rural west Texas dealer lot. 

Tue, 08/07/2012 - 13:49 | 2685233 aerojet
aerojet's picture

Not as long as you would think--that was a problem in '08 and '09 with the huge vehicle inventories where new cars were being stored wherever they could find room for them. 

Tue, 08/07/2012 - 12:19 | 2684977 francis_sawyer
francis_sawyer's picture

Don't knock the wrecking yard...

ODD JOB & AURIC GOLDFINGER put wrecking yards on the map...

Tue, 08/07/2012 - 12:01 | 2684912 azzhatter
azzhatter's picture

LaBeau is another commie sympathizer I would love to see imprisoned. His mouth is so tightly wrapped around GM's collective penis, I surprised he can speak

Tue, 08/07/2012 - 12:03 | 2684918 The Axe
The Axe's picture

I think you spoked VRD   Nuveen s and P Muni etf    flash clash 50 percent in 30 seconds......   or perhaps a new Knight trading algo

Tue, 08/07/2012 - 12:06 | 2684929 vinu02
vinu02's picture

Get ride of credit card and see how many able to purchase car.

Tue, 08/07/2012 - 12:06 | 2684932 mewenz
mewenz's picture

same concept the Fed & ECB  will do more and more of as time goes, if you can't find good collateral, change the definition of good

Tue, 08/07/2012 - 12:10 | 2684938 HD
HD's picture

Finally someone will give me top dollar for my "lightly used" AMC Gremlin!

Tue, 08/07/2012 - 12:27 | 2685009 SokPOTUS
SokPOTUS's picture

A Romney-mobile...

Tue, 08/07/2012 - 12:27 | 2685013 AlaricBalth
AlaricBalth's picture

What's the LTV on this Gremlin with the bimbo option package?

Tue, 08/07/2012 - 13:41 | 2685198 Overfed
Overfed's picture

Gremlins actually ARE selling for big $ on ebay.

Tue, 08/07/2012 - 12:09 | 2684942 mirac
mirac's picture

Imagine if Americans had to figure out the mileage in the Metric

Tue, 08/07/2012 - 12:21 | 2684988 francis_sawyer
francis_sawyer's picture

Imagine if Americans had to figure out anything... Perhaps someday soon, they will...

Tue, 08/07/2012 - 13:35 | 2685187 pods
pods's picture

I am still getting used to my metric Crescent Wrench.


Wed, 08/08/2012 - 21:13 | 2689603 Hurdy Gurdy Man
Hurdy Gurdy Man's picture

Imagine if we had to keep Germany weak so it doesn't Hegemon all over your cheese-smelling ass, Eurodick.

Tue, 08/07/2012 - 12:22 | 2684989 francis_sawyer
francis_sawyer's picture

All Americans have loosely figured out thus far is that they're "10-1"... & the checks still keep coming in...

Tue, 08/07/2012 - 14:03 | 2685270 UGrev
UGrev's picture

Imagine if Americans gave a shit about using the metric system. We think bigger.. always have. We can't help it if you need to use smaller units of measurement so you could assess your cock sizes. /end sarc

Actually, there is a pretty big move to metrics over here. Medical industry especially. But I'll be fucked in the ass if we adopt "stones" for measuring weight.  But it might be fashionable to say that you are N tron pounds.. nahhh.. 

Tue, 08/07/2012 - 12:11 | 2684947 buzzsaw99
buzzsaw99's picture

10 years old and 130K miles. omg

Tue, 08/07/2012 - 14:29 | 2685336 Papasmurf
Papasmurf's picture

What's wrong with that?  I stopped buying new cars in 1982. 

Tue, 08/07/2012 - 12:13 | 2684953 Neethgie
Neethgie's picture

if you crash two of them together is that like a CDO? do you get a better rating?

Tue, 08/07/2012 - 12:15 | 2684958 buzzsaw99
buzzsaw99's picture

the new battery and half a tank of gas go into one tranche while the worn out tires get put into another...

Tue, 08/07/2012 - 12:25 | 2685005 francis_sawyer
francis_sawyer's picture

We're at HALFTIME America!... (2nd half is about arranging sleeping accomodations in your 'CHOOMmobile')...

Tue, 08/07/2012 - 12:31 | 2685024 Tippoo Sultan
Tippoo Sultan's picture

I picture it looking like the van Sean Penn bailed out of each morning in, "Fast Times at Ridgemont High."

Tue, 08/07/2012 - 12:46 | 2685080 francis_sawyer
francis_sawyer's picture

I know that dude...

~Jeff Spicoli

Tue, 08/07/2012 - 12:47 | 2685083 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

here is the clip. Choom choom and away.

Tue, 08/07/2012 - 13:21 | 2685106 Tippoo Sultan
Tippoo Sultan's picture

Mr. Hand took that footage...


Tue, 08/07/2012 - 16:35 | 2685736 francis_sawyer
francis_sawyer's picture

You didn't film that scene... ~ lol

Tue, 08/07/2012 - 12:14 | 2684956 q99x2
q99x2's picture

I just got my 2013 tags on my 1992 Toyota Corolla this morning. That sucker still runs great. I bought it in 1992. I hope to outlive it someday.

Tue, 08/07/2012 - 13:45 | 2685215 Seer
Seer's picture

"I hope to outlive it someday."

Yeah, these things just keep running!  Tons of them down in Manilla: that's got to say something about them.

I've got 172k miles on my 1990.  Cheap to maintain and operate: for the first time I recently manged to eek out 40mpg (yes, highway miles); usually get around 37 or so.  Would like to be able to afford to pick up a new replacement engine to have on the standby for when this one finally kicks the bucket: might have a 100k left to go yet.

Finally got my "new" truck, a 1993 Ford (non-turbo - no electronics [except a cheap/simple glow plug controller, which I replaced]- these can be readily bypassed if needed]) IDI diesel- 248k miles and it probably runs smoother than any new vehicle out there!  Doesn't seem to leak a drop, or burn one.  $2,500, no "financing" required!

Tue, 08/07/2012 - 14:08 | 2685280 A Nanny Moose
A Nanny Moose's picture

Don't hold your breath on killing a Toyota.

Tue, 08/07/2012 - 14:32 | 2685349 Papasmurf
Papasmurf's picture

That'll buff out.

Tue, 08/07/2012 - 12:15 | 2684961 optimator
optimator's picture

I know of a couple coming out of bankruptcy that bought a new car, the dealer allowing the rebate to be the down payment.   Wife took off with the car, no payments made, and two years later the credit company is still looking for the car!

Tue, 08/07/2012 - 12:29 | 2685020 SokPOTUS
SokPOTUS's picture

Good.  At least somebody got something out of the bailouts...

Tue, 08/07/2012 - 12:16 | 2684964 GraveyardSpiral
GraveyardSpiral's picture

I suppose a car with 'only' 130K miles on it is a good investment choice to take the sheeples to their new part-time jobs at Taco Bell and Cinnabon!     Fuck You Bernanke!!!!!!!!!!

Tue, 08/07/2012 - 15:25 | 2685554 Papasmurf
Papasmurf's picture

A used car with only 130,000 miles is a better investment than a new car containing a battery costing twice as much.

Tue, 08/07/2012 - 12:16 | 2684966 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Of course according to MDB, channel stuffing will help the 'recovery'. Maybe he should get his channel stuffed...

Tue, 08/07/2012 - 12:20 | 2684968 HD
HD's picture

Push, pull or drag in your rusted out piece o'crap and have a qualifying 350 fico score and drive away today in a new Chevy Volt.

Tue, 08/07/2012 - 13:48 | 2685224 Seer
Seer's picture

And have a BRIGHT* future!

* Teach a man how to light a fire and he'll be warm for the day.  Set him on fire and he'll be warm for the "rest" of his life!

Tue, 08/07/2012 - 15:39 | 2685592 BooMushroom
BooMushroom's picture

That's the problem! All the rusted out pieces of crap were sent to the recycling plant during cash for clunkers.

Tue, 08/07/2012 - 12:18 | 2684974 SmittyinLA
SmittyinLA's picture

Financing cars was from "back in the day" when cars were NOT disposable consumables like they are now. 

Tue, 08/07/2012 - 13:55 | 2685251 aerojet
aerojet's picture

Cars were always depreciating assets, so I don't know what you're trying to say here.  Cars are more durable now than they ever were in the past (okay, maybe not Chryslers).

Tue, 08/07/2012 - 15:00 | 2685468 Seer
Seer's picture

"Cars are more durable now than they ever were in the past"

Yeah, just like people today are genetically longer-lived!  NOT!

Take away all those highly trained mechanics and specialized equipment (in the case of people it's trained doctors/surgeons and massive medical industry) and any little problem will take them out of the game.  Just saw this the other day, some woman with a compact Mercedes (only a 2006) that wouldn't' start; it was at a local Ford dealership (first place she came to after having a problem with the car); the mechanics there were baffled (battery was good, yet it wouldn't start- one guy thought that it might be the battery in the key-less key [I didn't stick around to find out]).

My old IDI diesel truck will be running long after all the new electronically controlled stuff has failed: manual trans, so even if no battery and given a big enough downslope I could still start the thing.  Kind of like a stealth bomber vs. a Cessna- take out the Stealth's computer system and it's a lawn ornament.  Slow and steady wins the race...

It really depends on what the individual asset is.  My 1990 Toyota has probably increased in value over what it might have pulled in several years back: people scrambling for fuel-efficient vehicles; mine gets better mpg than all but a very few new vehicles out there.

Tue, 08/07/2012 - 14:13 | 2685291 A Nanny Moose
A Nanny Moose's picture

I don't know. My 2000 Subie has 250K miles. Just replaced the trans and original clutch, and its good for another 100K at least.

Tue, 08/07/2012 - 12:27 | 2685017 tahoebumsmith
tahoebumsmith's picture

The older the car and the more mileage it has, the lower the price will be. As more and more Americans lose their full time jobs and salaries keep shrinking, people will have to buy less of a car... It's what people can afford, not what the industry thinks the cars are worth. Remember it was only a few years ago when the Government wanted all these cars off the road, Cash For Clunkers? Boy how things change when they see serfs signing 20% + interest loans to drive a piece of shit!

Tue, 08/07/2012 - 12:47 | 2685086 fuu
fuu's picture

Yet another example of the glory that is central planning.

Tue, 08/07/2012 - 13:50 | 2685234 Seer
Seer's picture

The "planners" are the banksters.  Govt is just acting as a conduit...

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