Sources tell TTAC that the glut of SUVs and trucks is so bad that the banks are not calling in the repo men. I repeat: banks are cutting maximum slack to people who are behind in their loan payments– to the point where some are driving around in their vehicles without making any payments. In a bizarre way, this makes perfect sense. Repo services cost money. Re-conditioning costs money. Storing the vehicles costs money. Equally important, the banks/credit agencies don't take the full hit to their bottom line until they sell the vehicle. Needless to say, the market is so stuffed with both brand spanking new and slightly used (i.e. excellent condition) product that we're talking about a MASSIVE hit. What's more, our man in the auction biz tells us that many dealers are holding their light trucks until the end of the month– and then selling them without reserve. You can imagine what that's doing to residuals. If not, check this from Tom Folliard, president and chief executive officer of CarMax: "During the quarter, wholesale industry prices for SUV's and trucks declined nearly 25%, which is approximately four times the normal depreciation expected over this period and well in excess of the depreciation expected over a full year. This is the most rapid depreciation of any vehicle segment that we have experienced in our 15 years."
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