Will We Never Learn? Subprime Auto Loans Accelerating (Again)

Tyler Durden's picture




 

It is remarkable that we greedy ignorant short-term-focused human beings never seem to learn that driving forward and looking in the rear-view mirror can only end in disaster. Forget 'dancing while the music plays' or other such 'defenses' of herd ignorance, the most recent data regarding Auto Loans is simply mind-blowing:

  • Subprime borrowers received 56.46 percent of loans on used cars in the quarter, up from 52.70 percent a year earlier.
  • The average loan-to-value on new cars was 109.55%
  • The average used car loan-to-value ratio rose to 126.62%
  • 77% of Subprime Auto Loans are for a period greater than five years

As Yahoo notes, citing some monkey, "Despite the rise in subprime loans overall, there is still a strong sense of managing risk. Because the overall lending environment has improved, lenders are making loans available to a wider range of customers."

 

Via S&P Auto Loan ABS report:

So not only are the auto manufacturers stuffing the dealer channels full of inventory (and choking off supply - a la Chevy Volt), they are so desperate once again to get consumers spending that they will give credit to anyone - with the defense that defaults HAVE BEEN low. I hope the reader can sense our incredulity that once again this complete and utter lack of understanding of the loan business cycle by supposedly intelligent individuals who are more than willing to offer credit (and on the other side - accept huge debts for short-term living standard improvements). </rant>

 

Perhaps not so surprising - sure enough - (h/t Andrew P) - Auto ABS are weakening already... As Santander and Honda's Auto ABS see annualized losses rising...

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Wed, 09/05/2012 - 12:11 | 2764700 Haager
Haager's picture

Why learn? There will be a bailout If TSHTF.

Wed, 09/05/2012 - 12:29 | 2764748 TruthInSunshine
TruthInSunshine's picture

-

 

"Hi Folks, this is Timmay 'The Runt' Franz at Geithner Motors, inviting you to come on down and lease this beeeeautiful new 2013 Chevrolet Volt for $0 down and just $199 a month.

 

Or how about this 2013 Silverado Crew Cab 4x4, for $0 down and just $189 a month?

 

No credit? Bad credit?

A string of multiple recent bankruptcies?

Just did a long stretch for felonies involving passing bad checks & other bearer instruments?

FICO score of 412 or less?

NO PROBLEM! WE FINANCE EVERYONE WITH A F*CKING PULSE!!!!!!!!!!

 

Our helpful lender, Ally Financial, will have representatives on site to service all of your financing needs!

 

But act quickly, because these hot deals for deadbeats will only be good through November 6th!!!"

 

[Cheesy Jingle]  

We know you'll be blown away...

   By the everyday savings you get...

    ....at Timmay Geithner Chevrolet!

 

[voiceover] Next to the Piggly Wiggly on Route 4

Wed, 09/05/2012 - 12:30 | 2764780 Precious
Precious's picture

Do junkies ever learn anything from their addiction?

Wed, 09/05/2012 - 12:50 | 2764799 Manthong
Manthong's picture

Going out and getting a nice $ 30,000.00 no-interest loan and shiny new GM car can enhance one’s esteem and feeling of self worth. Additionally, it serves to improve the economy and community by increasing business.

And even if you are a slug and default, you are contributing the debt balloon Ponzi and creating opportunity for Repo men of both of the financial and vehicular towing varieties.

It’s a Win-Win proposition that is downright patriotic.

Wed, 09/05/2012 - 13:09 | 2764870 ZerOhead
ZerOhead's picture

My self esteem has been in the crapper for years now but a $30K GM car isn't going to help with the ladies too much.

A 100% financed $300K Ferrarri on the other hand will make me feel 10X as good, get me laid 10X as much and more importantly help the economy 10X more...

Being Patriotic has never been so easy...

http://www.dupontregistry.com/autos/sitemap/sm-ferrari-financing.aspx

 

Wed, 09/05/2012 - 13:11 | 2764930 ParkAveFlasher
ParkAveFlasher's picture

Don't worry that's coming soon. 

Wed, 09/05/2012 - 12:58 | 2764876 aint no fortuna...
aint no fortunate son's picture

And most importantly, it brings the Great Reset one step closer, one car at a time

Wed, 09/05/2012 - 14:41 | 2765363 slewie the pi-rat
slewie the pi-rat's picture

 <--< YES

 <--< NO

slewie opinion poll:  should US Mint-produced gold and silver coinage be restored as LEGAL TENDER in the US as per the US Constitution and not subject to the fuking "collectibles" and OTHER TAXES?

yes or no? VOTE!

...please...  L0L!!!

Wed, 09/05/2012 - 13:35 | 2765042 slyhill
slyhill's picture

Sounds broken-windowish.

Wed, 09/05/2012 - 14:43 | 2765353 deez nutz
deez nutz's picture

And even if you are a slug and default

.... no no no, defaults are NOT happening!!  Loan re-working is the new NEW!!   Cash flow is never a negative.   Cut the payment "in good faith" -  so what if the muppet is paying for 9.75 years? GM has CASH FLOW. 

Think of it as "perpetually leasing" your own used car!!   

America still has some financial chicanery up it's sleeve.

Wed, 09/05/2012 - 14:47 | 2765380 Hippocratic Oaf
Hippocratic Oaf's picture

Of course they're inteligent. The idiot is the one who signs on the bottom line.

Wed, 09/05/2012 - 12:33 | 2764792 JR
JR's picture

GM Ramps Up Risky Subprime Auto Loans to Drive Sales | Investor’s Business Daily | 07/27/2012

"Is GM taking on more risk than is safe given our uncertain economy?" asks Edward Niedermeyer, TheTruthAboutCars.com editor-at-large. "They may be trying to goose short-term sales with subprime lending to boost its stock price, which is tied to the government getting out of its GM investment."

GM still owes about $26.4 billion in direct aid to the federal government. The Treasury owns 26.5% of the automaker, or 500 million shares. The stock price would need to be 53 to recoup those taxpayer costs.

http://news.investors.com/business/072712-620090-gm-risky-subprime-auto-loans-fuel-sales.htm?p=2

 

Wed, 09/05/2012 - 14:05 | 2765196 stormsailor
stormsailor's picture

pigg-wigg?   you must be from south carolina, yah

Thu, 09/06/2012 - 02:26 | 2767172 StychoKiller
StychoKiller's picture

[quote]

"Despite the rise in subprime loans overall, there is still a strong sense of managing risk. Because the overall lending environment has improved, lenders are making loans available to a wider range of customers." [/quote]

 

A case can be made that lenders are making loans available precisely because NOT ENOUGH borrowers with good credit exist!   Denile, NOT just a river in Egypt.

Wed, 09/05/2012 - 12:12 | 2764703 Cognitive Dissonance
Cognitive Dissonance's picture

Still waiting for the two-for-one, buy-one-get-one-free auto deals.

Not long now.

Wed, 09/05/2012 - 12:22 | 2764750 ParkAveFlasher
ParkAveFlasher's picture

Personally I'm holding off until hyperinflation makes my used car swell up to the price brand new. 

Wed, 09/05/2012 - 14:48 | 2765379 JuliaS
JuliaS's picture

... a brand new loaf of bread.

Wed, 09/05/2012 - 12:28 | 2764770 drink or die
drink or die's picture

I've seen buy one get one half off ads for cars on TV here locally (Portland, OR).  It was buy an F350 or whatever truck and get an econobox for half off.

Wed, 09/05/2012 - 12:35 | 2764798 Agent P
Agent P's picture

Our local Kia/Hyundai dealer ran one of these a few years ago.  Buy one of their top end models at MSRP and you got the low end model for free...I crap you negative.

Wed, 09/05/2012 - 12:47 | 2764825 Cognitive Dissonance
Cognitive Dissonance's picture

We'll know we're there when you can buy a Ford Focus at full list price and they throw in a F350 with the deluxe floor mats and naked lady rear wheel mud flaps. :)

Mud flaps

Wed, 09/05/2012 - 12:49 | 2764850 hedgeless_horseman
hedgeless_horseman's picture

 

 

You cropped out the bumper sticker that says:

I'D RATHER BE DRIVING A STRIPPER

Wed, 09/05/2012 - 12:52 | 2764859 Cognitive Dissonance
Cognitive Dissonance's picture

I had to. My mother reads Zero Hedge. :>)

Wed, 09/05/2012 - 20:15 | 2766430 monad
monad's picture

Great idea. If they rename the Chevy Vote maybe they can sell some.

Wed, 09/05/2012 - 12:49 | 2764855 francis_sawyer
francis_sawyer's picture

Gas grass or ass... Nobody rides for free...

Wed, 09/05/2012 - 13:05 | 2764903 DosZap
DosZap's picture

Our local Kia/Hyundai dealer ran one of these a few years ago. Buy one of their top end models at MSRP and you got the low end model for free...I crap you negative.

 

Not anymore, Hyundai owns 38% of Kia, and the both(esp Hyundai) are taking market share like a bitch,and most from Toyota, and Honda,Acura.(Genesis,and the top dog),Sonata's are every where.

Their quality is rocketing up, and their warranties are far better.

And their CEO said this is just the beginning.

Around here, the top two Hyundais are not dicounted at all and they are flying off the lots.

Salesmans paradise, IF they can get inventory to  sell.

Wed, 09/05/2012 - 12:19 | 2764708 hedgeless_horseman
hedgeless_horseman's picture

 

 

“The single message Chevrolet communicated this summer was ‘confidence’ and it rang true with customers when they saw how our product lineup is being transformed,” said Kurt McNeil, vice president of U.S. sales operations. “All four of our brands are building momentum behind new products* so we’re very well positioned as the economy continues to slowly improve.”

 

*GM's inventory increased from 663,439 on July 31, 2012 to 687,354 on August 31, 2012.

 

 

 

ADVERTISEMENT GOVERNMENT MESSAGE

__________________________________

There has never been a better time
to buy or lease a new GM!

Hurry now to your nearest GM dealer
before inventories increase even more!

2013 GM Yukon Denali AWD
403 HP
13 CTY / 18 HWY

Nicely equipped for only
$67,185

 

Easy credit available through GMAC Ally Bank!

On*Star tracking and cabin recording included free for 6 months,
then you pay to be tracked and recorded.

Wed, 09/05/2012 - 12:24 | 2764754 ParkAveFlasher
ParkAveFlasher's picture

Does "nicely equipped" mean "comes with a house"?

Wed, 09/05/2012 - 12:32 | 2764785 Precious
Precious's picture

No.  It comes with a domestic partner though.

Wed, 09/05/2012 - 12:38 | 2764809 Agent P
Agent P's picture

As a general rule in life, never pay over $40,000 for anything unless it comes with a doorbell.

Wed, 09/05/2012 - 12:48 | 2764849 Cognitive Dissonance
Cognitive Dissonance's picture

I was supposed to get a door bell with my SUV?

Damn. I'm calling GM now.

Wed, 09/05/2012 - 14:50 | 2765391 JuliaS
JuliaS's picture

It's called OnStar.

Wed, 09/05/2012 - 15:23 | 2765512 Cognitive Dissonance
Cognitive Dissonance's picture

When GM showed how they could remotely turn on and off the vehicle (among other things) I realized we were in BIG trouble.

Ding Dong......Big Brother calling.

Wed, 09/05/2012 - 20:18 | 2766442 monad
monad's picture

Colorado 0A5599, free & clear

Wed, 09/05/2012 - 12:48 | 2764851 ParkAveFlasher
ParkAveFlasher's picture

Nothing like $67,000 that becomes $50,000 when you drive it over the first curb cut.

Wed, 09/05/2012 - 14:25 | 2765294 Big Corked Boots
Big Corked Boots's picture

I'm driving a '97 Lincoln Town Car that I bought for $6k. I discovered the window sticker in the glove box and it was originally $41k. That's like $60k now if Ford bothered to make the Panther platform anymore.

Cost per mile, price per pound, physical size, safety features and even by MPG standards (I get 24 hiway) there is nothing comparable. I don't catch much pussy with it but the silver hoard grows every day. I do get admiring glances from older car-service guys in the city, though.

Used Detroit choomwagons, bitchez.

 

Wed, 09/05/2012 - 13:44 | 2765071 WillyGroper
WillyGroper's picture

@ $67K it is ur house.

Wed, 09/05/2012 - 16:49 | 2765766 A Nanny Moose
A Nanny Moose's picture

For that kind of money you could pick up a nice used motorhome.

Wed, 09/05/2012 - 14:28 | 2765312 Papasmurf
Papasmurf's picture

Denali spelled correctly is Denial. 

Wed, 09/05/2012 - 15:24 | 2765518 Cognitive Dissonance
Cognitive Dissonance's picture

Nice. Very nice.

Can I steal that from ya? Or would you rather I just owe ya. :>)

Thu, 09/06/2012 - 02:31 | 2767178 StychoKiller
StychoKiller's picture

At this point, I see no difference...

Wed, 09/05/2012 - 12:13 | 2764711 Conrad Murray
Conrad Murray's picture

Tour through any ghetto, you'll see lots of people driving new GMs. Been going hard for about 6 months now around here.

Let's all go to a GM dealership, get some rides, and have a big "accident" on some major highway. The wreckage can spell out "FUCK BERNANKE" when viewed from the news choppers.

Wed, 09/05/2012 - 12:34 | 2764795 CrashisOptimistic
CrashisOptimistic's picture

Bloomberg radio yesterday was interviewing some auto analyst who was celebrating the sales numbers with this kind of thinking:

"Remember, this is a big ticket item.  People may say they are depressed, but they are making big commitments and what they say and what they do are not the same thing.  They clearly have confidence in the future."

YOU FUCKING MORON!  THEY AREN'T GOING TO PAY THAT BACK!!! 

Wed, 09/05/2012 - 12:43 | 2764826 Chump
Chump's picture

Yeah I've never heard of anyone making a big-ticket purchase without regard for future commitments because they were depressed and listless.  That's why folks experiencing a mid-life crisis tend to become frugal knitters, right?

Wed, 09/05/2012 - 13:09 | 2764920 LongSoupLine
LongSoupLine's picture

 

 

"Yo, Jerome and Kanisha both got new Escalades playa'!!"

Wed, 09/05/2012 - 16:44 | 2765751 4horse
4horse's picture

you have an ugly mouth in any language

which is an even uglier mind

Wed, 09/05/2012 - 12:14 | 2764713 Ancona
Ancona's picture

I seem to remember seeing [on this site] that the dealers are actually backing these loan programs themselves somehow. The banks won't lend you money any more unless you are wealthy and don't need it. I have a credit score of just over 800, and the bank actually cut my access to my credit line by 60%, citing risk as the primary factor. Understand now, that my credit line was less than half of my accrued savings, which by the way the bank is in posession of. WTF? So, now we're going back to handing loans to mirror foggers? Brilliant plan.......absolutely brilliant plan!

Wed, 09/05/2012 - 12:31 | 2764781 Cursive
Cursive's picture

@Ancona

 

Correct.  The dealership group that I used to work for writes their own loans through an administrative intermediary.  The dealership is the bagholder here if these loans go south.  This program can be a big moneymaker for the dealership, though, because the interest rates are astronomical compared to new car sales (10 to 12% versus 2.99 and 0% programs on new).  Still, if/when the loan goes bad, it's the dealer holding the paper.  Dealers never worry about tomorrow.

Wed, 09/05/2012 - 15:00 | 2765433 Hippocratic Oaf
Hippocratic Oaf's picture

Same happened to me through Bang of Amerika.......fuckers! 

Wed, 09/05/2012 - 17:53 | 2765939 juslen
juslen's picture

They need you to have more money in the banks so they can afford to lend it out to people who can't afford it. Don't ask me why!

Wed, 09/05/2012 - 12:14 | 2764714 Dr. Engali
Dr. Engali's picture

The average is 579? Man they are really financing some crap if the average is 579.

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