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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q99x2's picture

Wrecking yard repos.

glenlloyd's picture

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

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?

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. 

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. 

francis_sawyer's picture

Don't knock the wrecking yard...

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

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

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

vinu02's picture

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

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

HD's picture

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

AlaricBalth's picture

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

Overfed's picture

Gremlins actually ARE selling for big $ on ebay.

mirac's picture

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

francis_sawyer's picture

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

pods's picture

I am still getting used to my metric Crescent Wrench.


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.

francis_sawyer's picture

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

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.. 

buzzsaw99's picture

10 years old and 130K miles. omg

Papasmurf's picture

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

Neethgie's picture

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

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...

francis_sawyer's picture

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

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.

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!

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!

SokPOTUS's picture

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

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!!!!!!!!!!

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.

_ConanTheLibertarian_'s picture

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

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.

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!

BooMushroom's picture

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

SmittyinLA's picture

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

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).

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.

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.

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!

fuu's picture

Yet another example of the glory that is central planning.

Seer's picture

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