If there are some of you out there that are frustrated that I haven’t returned your emails, the answer is simple – I’m doing this on a backup laptop that doesn’t have my email. My main one went to a local Laconia shop on Thursday and I thought I’d have it back later on in the day. Thursday became Friday, and when I called at 2pm yesterday (their website said they close at 3pm on Saturdays), I found out:
- Their website is out of date (on multiple things) as I received the automated attendant’s “You have reached us after normal hours…”
- I wasn’t going to have my laptop with my emails (and a lot of OTHER stuff I needed for now stalled-out projects for an additional two days).
So, I apologize if it has appeared that I’m ignoring you…(and yes, I will have WAY more than the 3,000 unread emails of before). But using my backup came with a couple of good nuggets and I’ve added ZeroHedge to my normal reading sites. Now, while the title of this post is “Bank Of America Will Start Bundling EV Charging Stations With EV Auto Financing“, I kinda figured that I already knew that it made sense – they need people to go into debt, and pay that bill, to make money (emphasis mine, reformatted):
Fabien Thierry, head of consumer vehicle products, told Bloomberg: “Bank of America has been supporting the electrification, and we’ve been saying that we want to be one of the EV financing leaders.” He said he believes the bank is the first to offer the service. The charging stations can range from $200 to $2,000 generally, while the average price for an electric vehicle in the U.S. is about $65,000.
Thierry said that more EV-centered initiatives are on their way for the year ahead.
Well of COURSE they are – the ESG policies (Environmental, Social, Governance) policies of BlackRock, Vanguard, and State State are driving BoA’s “supporting the electrification” of that E and S. Not surprising or surprised. But this is what caught my eye an that I didn’t know (and why ZH is now on my daily list). Reformatted, emphasis mine but keep in mind that the recent new car pricing was like houses – consumers were buying them for well above sticker prices and taking out loans to pay for them.
That’s how 2007/2008 happened overall – paid prices were over asking prices – and then crashed hard leaving people with assets worth far less than what their loan amounts are for. We all know what happened then – turned in the house keys and just walked away letting banks holding the bag(s).
Recall, we wrote months ago that at this stage in the looming credit bubble, people were starting to take on second auto loans with the knowing intent on defaulting on their first.
As Twitter’s CarDealershipGuy – who claims to be an anonymous auto-industry CEO and whose analysis has been featured in places like the NY Post and who frequently Tweets about the state of the auto market – laid out a long thread:
“This morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending. I’m now convinced that there is a massive wave of car repossessions coming in 2023,” he wrote.
Recapping much of what we said above, he noted that over the past 2 years, many people took out exorbitant loans on cars and while car values were inflated (and still are) but many people simply had no choice and bought an overpriced a car. Then, echoing the Fitch assessment, he notes how those buyers are underwater: ”
Car valuations are now plummeting. Some cars have declined in value as much as 30% y/y. And these same people that took out these big loans are now ‘underwater’. Basically, they owe banks more on these cars than they are worth. And the banks are well-aware of this.”
The punchline is his personal experience from late last week.
“This morning, one of our General Managers opened up DealerTrack — a portal that dealers use to communicate with auto lenders — and highlighted something very concerning. 9 of our lending partners have started WAIVING ‘open auto stipulations’ for consumers.”
What this means, he explained, is that once consumers are stuck with a vehicle they paid too much for, they can’t trade it in without putting some money up front to cover the difference of what is owed on it versus what it is worth. At that point, he notes,
“Dealer can’t sell consumer a car, Consumer can’t buy a car, And, you guessed it, lender can’t finance a car!”
The lender then knows that most consumers are stuck and waives the open auto stipulation – meaning they allow the consumer to buy the new car with a second loan knowing they already have a first one. But the lender does it because they know that the buyer will default on the old, other car.
Cue default avalanche: “This is NOT normal. But it’s the only way lenders can finance cars and dealers can put cars on the road. And the implications of this will be tons of repossessions,” the CEO wrote.
Many new cars now sell for below sticker prices. That has now pushed used car prices down as well from almost parity with new ones. “Tons of repossessions” will mean that banks will be stuck with a lot of assets as well and will be working to get them off their balance sheets as quickly as possible. And either that will be direct sales (brokered, of course as you won’t be seeing “CARS HERE CHEAP” signs in bank parking lots) or sold to dealers whose used car inventories swell – but at less than usual used car prices.
In short, replacing the “now off lease” vehicle marketplace in a way that is unfortunate. But that means opportunities for others (Schumpeter’s “Creative Destruction”).
The 2015 F-150 is now into middle age (years-wise) and was an “3 year off-lease” purchase. Given the last 3 years and the heightened cost of new cars, not as many folks were leasing as they were before. Thus, my idea of replacing one former (and very low mileage) leased vehicle with another one went up in smoke when the off-lease marketplace dried up.
However, repos may be my answer (while being very unfortunate for the previous owners) IF I have to replace the pickup (although at my age, was thinking “this might be the last vehicle I ever buy”). But as needed, I will take advantage of the opportunity.
