“Doomed to repeat” and all that, it seems. Back then, I just couldn’t understand why people were not just using their houses as ATMs but as slot machines in always betting that the housing market prices would continue to just climb out of proportion that was normal – the NEW Normal, they called it. I knew what some of these people were making for income – my eyes just bugged out at the mortgage amounts (and rates) they were carrying! They just knowingly nodded their heads at me when I refused to follow along as if I was just a doddering financial moron.
I’m still in my house – they ain’t. Who was the fool (ok, I can be a fool for OTHER reasons, just not this one). But a new twist on this has come up that really has my head wanting to be scratched – what, you all want to lose a ton of money AGAIN??? Emphasis mine, reformatted:
Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co. Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.
Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.
Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars, state prosecutors said in court documents. Through it all, Wall Street’s appetite for high-yield investments has kept the loans — and the bonds — coming. Santander says it has cut ties with hundreds of dealerships that were pushing unsound loans, some of which defaulted as soon as the first payment.
Yeah, sure thing. Look, it’s one thing to lose your home but another to lose your car. Sure, the money is a lot lower but it still triggers a whole host of really bad cascading events – the first being your job if you can’t “get theah from heah”. However, with the rates as low as they have been in a long time (many times I have commented to TMEW as the car ads rolled by “how can they do this for this cheap?”), it does seem that you can get a WHOLE lot of car for not much money – at least up front. Hey, if you have the resources to do, that’s one thing but it seems like a whole lotta people are going “Hey, I WANT that” instead of “what do I need” or seemingly “what can I afford if things go south?”.
My vehicles are from 2003 and 2005 – they are starting to cost more than I like on maintenance costs so I’ve been watching these ads rather intently. But given that my company was sold from one private equity firm to another one (known for immediately taking out the knife), I’m hesitant to go any further than I have. No sense in making the plunge and then having to see the flatbed come to tow it away.
And there’s this at the end of the post:
This never ends well for the borrowers or for the lenders, although a glut of barely-used cars would be a boon for anyone looking for a great deal.
Well, there’s a tsunami of cars coming off 3 years leases also that may well bring the used car marketplace back normal after Obama’s Cash for Clunkers program made them soar – millions of them.
Patience, Skip, patience.
(H/T: Instapundit)