By on June 21, 2013

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The Detroit Free Press paints a pretty clear picture of the automotive lending landscape: auto loan terms are rising, with 1 in 5 loans now lasting longer than 6 years. At the same time, the average credit score for those taking out loans is dropping. Ominous signs for a car market that’s running on the hype of a perpetually increasing SAAR, right? Well, not according to some.

Despite more red flags than a Politburo meeting, the Freep manages to put a positive spin on things, trotting out Melinda Zabritski, Experian’s senior director of automotive credit, and Reid Bigland, head of U.S. sales for Chrysler.

Even though loan terms are up and even the crappiest of the credit worthy are qualifying for car loans (those with sub-700 credit scores accounted for 25 percent of car loans in Q1 2013, up from 17 percent in 2010), Zabritski is sunny in her disposition

I think most people agree it’s very healthy. The growth still seems to be rather well managed…From what I am hearing from the lenders, (there is) a very strong sense of optimism. I don’t think it’s anything to be worried about,” Zabritski said. The thing to watch is consumer behavior in the longer-term loans. I think it’s easy for people to have that reaction of wanting to say ‘the sky is falling, subprime is growing,’ but it is still growing very modestly.”

This kind of guarded optimism could only be trumped by Bigland’s “What, me worry?” attitude towards the whole thing. Cheering the easily available credit for auto loans, Bigland shrugged off any notion of Chrysler being dangerously exposed to downside risk on sub-prime loans

For automakers like Chrysler, which don’t own their own finance companies, the risk is minimal. “I don’t own the paper; it’s the banks that are taking the risk,” Bigland said.

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Last time we checked, Chrysler does have a captive financing arm with Santander, one of the largest sub-prime auto lenders in America. Chrysler may not have held the paper prior to the establishment of Chrysler Capital (their financing arm in conjunction with Santander) but sub-prime financing doesn’t look like it’s going to stop any time soon.

That’s because the QE-fueled credit bubble is great for auto financing.

“Credit availability, in my opinion, is the best it has ever been in the history of automotive financing,” Reid Bigland, Chrysler’s head of U.S. sales, said earlier this month. “Banks have money, they have clearly been burned on mortgage loans … and from what I have seen … banks have looked to autos as a segment that has held up extremely well.”

What the Freep doesn’t tell you is that banks are packaging auto loans into securities, just like they did with mortgages, and selling them to investors. The same quantitative easing that makes auto loans so cheap has also wiped out yields on safer investments like bonds. Auto-backed securities, especially risky ones like sub-prime car loans, are the only thing providing decent yields, and investors can’t get enough of them. That means cheap money and car loans for peope who wouldn’t normally qualify for them.

Of course, it’s also good for companies like Chrysler, who drive a lot of their sales from sub-prime buyers. They’re playing a good part in helping to drive the SAAR back to pre-recession levels amid an optimism-and-easy-credit fueled euphoria. What happens when the music stops, QE ends, the economy slows and buyers can’t make payments? The consequences of that (repossession, auctions, a hit to residual values) won’t be great, but they’re not as bad as what could happen if the auto makers buy into the credit-fueled recovery too much. Remember 2008 and the days of overcapacity, excess inventory, sputtering sales and bankrupt dealers? Don’t say I didn’t warn you.

 

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74 Comments on ““All Is Fine In Sub-Prime Land,” Says Someone With A Vested Interest In Its Success...”


  • avatar
    sunridge place

    Chrysler has zero ownership stake in Chrysler Capital. Santander cut them a check and opened up a new business unit called Chrysler Capital and gives them a quarterly payment. Chrysler’s only exposure is on lease residual losses–but they also can share in any lease residual gains.

    • 0 avatar
      billfrombuckhead

      Why aren’t the Koreans called on this instead of the Detroit 3. Hyundai and Kia do more sub prime financing and aren’t even in the volatile full size truck market. The Koreans also are doing the financing themselves.
      They seem to be more of a posterchild for the subprime market, but hey this website hates the UAW, Chrysler and GM. Every month they thrive, Truthaboutcars looks bad and has an axe to grind.

      • 0 avatar

        Hyundai is not that actively involved in sub-prime

        • 0 avatar
          J.Emerson

          According to TTAC itself, 4 of the top 10 cars bought with subprime financing were Hyundai/Kia products, including 2 of the top 3:
          http://www.thetruthaboutcars.com/2013/04/a-snapshot-of-what-sub-prime-buyers-are-driving/

          And unlike Chrysler, which essentially gave Santander permission to use it’s logo, Kia Motors Finance and and Hyundai Motors Finance are both wholly internally owned, from what I can tell. So maybe we should be looking at political reasons for this rather careless omission after all.

          • 0 avatar
            danio3834

            If my local Kia dealer’s commercials are to be believed, this simply must be true.

            How can you approve EVERYONE GOOD CREDIT BAD CREDIT NO CREDIT SIGN AND DRIVE 0 DOWN $99 A MONTH without a huge helping of sub-prime buyers?

          • 0 avatar
            tuffjuff

            danio –

            Said any Russ Darrow dealership in the great state of Wisconsin.

          • 0 avatar

            Yes. They are KIA vehicles. The distinction is important.

        • 0 avatar
          sunridge place

          ‘Hyundai is not that actively involved in sub-prime’

          Derek- you write about this topic often and think Hyundai isn’t that actively involved in subprime? Come on.

          Edmunds data for the first 5 month of 2012 had Hyundai/Kia #1 at 31% subprime.

          http://www.autonews.com/article/20120604/RETAIL07/306049962#axzz2WrWvDfpk

          Is your point that its all Kia? Or, do you have access to different data that you aren’t sharing?

          • 0 avatar

            From what I understand it skews heavily towards Kia.

          • 0 avatar
            sunridge place

            Agree that KIA is definitely higher than Hyundai…but don’t claim Hyundai isn’t ‘active’

            Hyundai probably runs high teens to low 20% like Ford/Toyota etc. KIA may run 50% subprime putting Hyundai/KIA in the 30% range combined.

        • 0 avatar
          Flybrian

          Please. Hyundai and Kia are both heavily involved in subprime. Anecdotal auction run evidence suggests that; actual evidence validates it.

  • avatar
    raph

    Seems like an inescapable trap, the result of an economy that clings to the past and its unsustainable standard of living.

    • 0 avatar
      taxman100

      100 percent correct. Property and other state and local taxes are much higher, plus fees on everything you buy (Obamaphone, electric, natural gas, security fees, 911 system fees, etc.) for the large number who no longer can support themselves or their families.

      My taxes and utilities as a percentage of income is much higher than when my parents were my age, back in the 1970′s.

      Just like the individual, our federal government is borrowing like crazy since it can no longer support itself.

      • 0 avatar
        corntrollio

        “My taxes and utilities as a percentage of income is much higher than when my parents were my age, back in the 1970′s.”

        Taxes? Maybe sales tax is higher, but I doubt property tax is higher in all cases, and federal tax definitely is not. State tax could be, depending on which state.

        Utilities — well, sure, just drop your cell phone and cable and interwebs, and you can go right back to the 70s.

        • 0 avatar
          taxman100

          Half way there – no cell phone for me (wife does have a Tracfone, but even that had to pay the Obamaphone fee and sales tax).

          Ditto for cable – we do not have that either. I do have internet since we are paying $8 a month for Netflix.

          I’d drop the Internet as well, but then I’d have to mail all of my bills – have you seen the price of a stamp?

          • 0 avatar
            sfvarholy

            Cut the “Obamaphone” crap. The Universal Service Fund predates even the Clinton Administration. It is assessed on all — carriers — to subsidise service in poor and rural communities. In fact, those fees go right back to the carriers. They didn’t want to do the accounting, so they petitioned and got permission to disclose it on the bill and have the customers see it.

          • 0 avatar
            tuffjuff

            But it’s COOL to use Barack Obama’s name in a derogatory manner.

          • 0 avatar
            28-Cars-Later

            Same way it was so cool to poke random fun at Bush. Both are equally lame.

          • 0 avatar
            corntrollio

            ::have you seen the price of a stamp?::

            Yes, it’s ridiculously cheap considering the size of the US, how broad-reaching USPS actually is, and how much postage costs internationally.

          • 0 avatar
            Power6

            Many who come into my home are surprised I can pull in full HD of the networks we grew up watching, no need to pay for TV.

            We also save a ton using an MVNO for our smartphones. Paying the carriers 3 times as much seems so foolsh now.

            I wonder what people in the 70′s “just had to have” to get by in life. Credit was tougher then though so harder to get into trouble maybe.

      • 0 avatar
        J.Emerson

        “Property and other state and local taxes are much higher”

        “My taxes and utilities as a percentage of income is much higher than when my parents were my age, back in the 1970′s.”

        [citations needed]

        • 0 avatar
          28-Cars-Later

          I too would like to see some citations. Without citations I would argue its certainly possible this is true, but its also very possible this percentage is similar but commodities pricing is much higher relative to 1970 and thus putting more pressure on your budget than say taxation.

          This one has a chart of federal income taxes from 1958 juxtaposed against those in 2009. Unless I’m reading it wrong the federal rate was 25% up to the equivalent of 100K in 2009 dollars, then it skyrockets as you earn more, so one could argue taxes are the same or technically lower in this period relative to today. Then again we must remember commodities and real estate pricing in 1958 relative to now, which may generate the perception of “back in my day it only cost X”

          http://www.taxpolicycenter DOT org/UploadedPDF/901456-Tax-Paid-Each-Rate.pdf

          http://www.businessinsider DOT com/history-of-tax-rates?op=1

          • 0 avatar
            corntrollio

            Doesn’t Chart 2 on that first link suggest that most people would have a lower federal tax rate now than in the 70s?

            I don’t think this is a mystery to anyone who actually studies taxation and has looked at federal revenue/budget documents.

            But there are a lot of know-nothings who like to pretend they know about it.

          • 0 avatar
            highdesertcat

            corntrollio, you are right that most people would have a lower tax rate now than during the 70s, but you failed to consider that today’s money is worth a lot less than back in the 70s.

            People who lived and worked through the 70s were often heard saying, “the harder I work, the further behind I get.”

    • 0 avatar
      Big Al from Oz

      @Ralph
      The US is living well beyond it’s means, this isn’t sustainable.

      Yes, you are experiencing current economic improvement. But this is coming at a cost of massive borrowings. It’s not possible to borrow out of debt.

      The total GDP of the US is based on 40% government expenditure. The total tax take of GDP is 27%.

      No matter how much spin is placed on these figures and your economy improves markedly drastic restructuring is required.

      When this restructuring occurs your GDP will have to drop along with your standard of living. Even now your standard of living in at early 1990s levels.

      Japan and the Europeans are more or less in the same boat. The West (OECD) really have to take on the developing nations and realise that we can’t live on credit for much longer.

      Trade barriers and tariffs will only inflame the current imbalance between us and the rising economies. We have to work with them better to reduce our handicap. In a decade the developing markets will represent over 60% of the global economy.

      There will be winners and losers in this current situation and the US isn’t out of the woods yet, by a long margin.

      Total government expenditure has to come in below 27%. Remember like any household or business repayments are needed. This will also cut into money available to replace and repair infrastructure, welfare etc.

      The first thing I would look at is reducing business welfare and subsidisation of all industries (including the agri business).

      The reality the left and right of politics don’t have adequate answers to the problems. Why? Because they are more interested in themselves and their lobby groups than the good of their respective country.

  • avatar

    Mixed bag. Yeah, subprime auto loans are up, and that’s worth watching, especially with respect to companies like Chrysler and Hyundai that seem to go out of their way to get this business more than some others. On the other hand, subprime auto loans have always always always been a part of this business, this isn’t all that extraordinary, and these loans default at a much lower rate than subprime mortgages, FICO score for FICO score.

    So it’s not (necessarily) 2008 all over again only with cars. Defaults are lower on car loans because people in a cash crunch prioritize their car payments higher they need the car to get to work — and because cars are easy to repossess and everybody knows that. And subprime auto ABS aren’t nearly as huge now as crap-based MBS were back in the day.

    So… meh. Worth watching, but not yet time to get too excited, I’d say (and have said, elsewhere.)

    • 0 avatar
      bachewy

      +1

    • 0 avatar
      NormSV650

      I just got approved for two(2) car loans worth over $70,000 on a mid-to-high 600 score with no debt. “Look at those new Toyotas”!

      A look at the bigger picture is needed for sure.

    • 0 avatar
      Dr. Kenneth Noisewater

      Just swapped out my 2011 Volt for an 2013 (new features, slightly more battery, same color combo) to take advantage of the $4k on the hood, plus another $7500 back from teh fedz, plus some dealer goodies and a 1.55% 5yr loan whose monthly nut is about $50 lower than my prior loan. Zero down aside from the taxes, tags and warranty that I didn’t want to pay interest on. My 2011 was about 2k underwater but they didn’t ding me for the hood dent or paint scratches that would have cost maybe $500 less than that to fix.

  • avatar
    Hummer

    6 years, that’s a pretty good sign you need to look for something cheaper.

    While their paying people back with interest, others will be paying back themselves.

  • avatar
    tresmonos

    If the dollar keeps getting shanked by QE, exports of used and repo’d cars will continue. It’s hard to predict where this path will lead us. Automotive is taking off while the rest of the manufacturing sector is taking it on the chin. Gov’t contracts are down and military spending will continue to be cut.
    If and when the music stops, it won’t be pretty and the best I could hope for is avoiding hyper inflation.

  • avatar
    OneidaSteve

    I am a former banker, just leased a 2013 Camry. Let me make a long story short about how easy it is to get cheap credit right now.

    Have high income, very low debt. But I just built a house, and i have a lowes credit card with high % balance utilized (zero % deal on new cabinets). Plus, i recently closed a 12 year old BofA credit card, and didnt realize i left $9.93 unpaid. Got a late notice for the ten bucks. Oops.

    In the past, when I check my credit my score was always in low/mid 700s.

    Last week, i go to get a new camry. Run score= 642. WHAT? read detail:

    1) % on some credit lines too high
    2) One 30 day delinqincy.

    My credit report prints to more than 12 pages; all payments on time. Mortgages paid off, many cars, credit cards. Thy have two minor quips with me and I lose nearly 100 points? What the heck.

    IMPORTANT PART OF THE STORY

    So I am mortified in front of this finance kid. He says no problem, according to Toyota credit a 642 is a Tier 2. (3rd rank from top) My lease payment would grow $10 a month from the best rate. ONLY $10 a month difference?

    So we add my wife’s credit, 700+ off we go with lowest possible payment.

    Moral of the story, dont worry so much about your score when buying a car, they dont really care anyways.

    • 0 avatar
      John Fritz

      OneidaSteve, a little off topic but I am in the exact situation you are in. Not a blip for six-plus years and yet a score in the sixes. Can’t figure it out and yet it hasn’t stopped me from receiving favorable terms for everything I’ve pursued. So is Fair Isaac screwed up now too? Who knows?

    • 0 avatar
      genuineleather

      High credit utilization isn’t good, but it’s the delinquency that killed you: ONE 30 days past-due bill can shave 100 points off a good credit score.

      • 0 avatar
        tpepin

        Exactly. Past due will murder you. Last year when my wife almost bled to death in front of me giving birth to our twins, which resulted in a 13 day hospital stay and extended convalescence where I was more or less taking care of 3 people solo – I paid everything late and my credit score was creamed, 815 down to mid 600 in a matter of two months.

        I brought everything back to current after 60 days, didn’t matter, there it sits in the “Orange” according to MyFICO 17 months later.

      • 0 avatar
        Scoutdude

        High credit utilization is good, one it tells them that others have found you a good risk and two it means you can’t go crazy and rack up a ton more debt in a short time and possibly get yourself in trouble.

    • 0 avatar
      J.Emerson

      Thank you for your story. As a young person, I’m still learning the ins and outs of building a good credit history. It appears that if you want a really good score, the whole “just pay your bills on time and don’t go into a lot of debt” isn’t good enough to get you in the absolute top tier anymore.

      • 0 avatar
        bball40dtw

        You need variety and history in your credit profile. Sometimes cosigners are recommended on a first auto loan. Even though my wife had a better credit score than I did at the time, adding me to her first auto loan gave her better terms because I had two vehicles with VW credit before (with no missed payments). Until we got married, she had a Ford Motor Company owned vehicle. I wish she still was able to have that unlimited milage, non rated insurance policy included, open term, discounted lease.

      • 0 avatar
        DenverMike

        If used right, credit cards are your friends. Remember credit cards aren’t evil, but a necessary evil for a perfect credit score.

        Get 4 and run them up while constantly asking for a review to lower your interest rate and “up” your credit limit. Don’t live beyond your means, but use them liberally for a while for things you would have bought anyways, while hoarding some unspent paychecks for a year or so.

        Then pay them off, systematically, and use them just enough to keep them lubricated after that.

        Once you have history of paying on time with low balances AND 50 to $70K in total available credit, you’ll be around an 850 FICO.

        I’ve only had credit cards and never a car or home loan, but have a perfect FICO score only because of credit cards.

        If you need a loan to start a business, no one else will give you an unsecured loan, so that’s another plus.

    • 0 avatar
      nrd515

      It happened to me too, I was around 740-755 for about the last 5 years, at least, then I either didn’t get the statement in the mail, or I lost it somehow, and I missed a $15.87 payment. Then I went to 655, something like that, and it took me about six months to get back over 700. It makes no sense. Obviously, I made a mistake, and a minor one, but about 100 points? That’s insane. If it had been my mortgage, or even my car payment, that would/could possibly mean something, but less than $16 indicates nothing but a screw up on my part, or the USPS lost my payment somehow. That happened years ago once, BofA didn’t get my somewhat large payment, and I sent out another. Just as I was about to give up on them ever getting it, it showed up. They actually called me to tell me it had been applied. They supposedly took off the late pay from my record, but it took several months for my credit score to get above 700 again. One of the credit bureaus insists an account in my father’s name, opened by my mother in 1964 is mine, even though I was 8 at the time. It’s meaningless, as it hasn’t had a balance in 15 years, but their insistence that it’s my account is pretty funny. I have a letter that is just over the top aggressive that they sent me after I wrote them, complaining that there were two accounts on my report that weren’t mine. One they removed, the other one wasn’t removed, and when I repeated my request that it be removed too, they sent me the weird letter. The other two bureaus don’t have this account listed at all. Odd.

      • 0 avatar
        DenverMike

        It’s too easy to not see or not get the ‘statement’. It’s a good idea to get on direct pay, but once you’re “late”, you still have 30 days to pay before it dings your credit score. The credit card company will send you a reminder arriving around the 15th day, call you at home (if they have your current phone) and or both. Either way, next month’s statement will let you know you’re late, so sent that one in on time or early and you’re still in good graces.

    • 0 avatar
      Dr. Kenneth Noisewater

      In Feb 2011 I had just finished a 4.5yr debt management plan for about $45k in CC debt. 6 months later I’d switched cities, rented a house, and gotten a car loan for ~$35k at 3.9% from my CU. A year later I bought a house at 3.375% 30yr fixed with 5% down conventional (FICO: ~710), and ~9 months after that (2 weeks ago) I got a new car at 1.55% 5yr from GMAllyC (FICO: ~810). I could actually pay off the car loan entirely and still have enough savings to bring the home loan principal up to 20%, but I’d rather have the cash available for emergencies (~2yr+ of mortgage and car payments).

      Money is freakishly cheap these days. I may need to get solar panels while the getting’s good.

  • avatar

    I’m a little confused, below 700 is “deep subprime”? I thought 700 was close to the top of the credit scale.

    D

    • 0 avatar
      dash riprock

      Below 700 is definitely not deep subprime. It is not subprime. A credit score of below 600 puts you into the subprime category in Canada for mortgages, not sure about auto loans.

      • 0 avatar
        dash riprock

        Top of the scale is 900, the highest I have seen is 852

        • 0 avatar
          28-Cars-Later

          No finance expert, but I believe the FICO score tops out at 850, Canada may use a different metric.

          • 0 avatar
            Summicron

            When we refinanced back in March they said mine was 853 and my wife’s 849. Ironic because her acumen is the only reason either of us is up there.

            She explained why that was so and I promptly forgot. My job is grounds, maintenance and reaching high things.

          • 0 avatar
            Monty

            28 Cars – Yes, Canada tops out at 900.

            Summicron – mine is 855 and the wife’s is 817, and the only reason I know that is due to refinancing to add a new garage. It earned us the lowest rate at 2.19% at RBC, saving me almost $3000 in interest over the final 7 years of my mortgage. Of course had I not been so busy doing maintenance, groundskeeping and reaching for high things I might have been more cognizant of it!

          • 0 avatar
            dash riprock

            In Canada the scale is between 300 to 900 through Equifax. The algorithm the agencies use to establish your credit score is proprietary and not published. As oneidasteve pointed out part is based upon the % of revolving credit utilized, part length of time credit lines have been open, and many other metrics.

            Cancelling old credit cards that you no longer use can negatively affect your score as it increases the % of revolving credit used, and reduces the time history of your credit lines. So if you have an old no fee credit card, do not cancel it.

            I now how to reference Monty as the highest score

          • 0 avatar
            Summicron

            @Monty

            All new garage or re-building over the old slab?

  • avatar
    lowsodium

    The answer is to buy a cheaper car and learn how to work on it.

    • 0 avatar
      krhodes1

      The answer is certainly to work on whatever it is yourself whenever possible. What’s cheap depends on your income and other expenses.

      Some guys have kids in college and a wife with a shoe habit, I have a garage full of cars. As I put it to a guy I work with (who has three kids approaching college age), my BMW cost about one year at a good private college, and my FIAT cost about one year at a good state school.

  • avatar
    olddavid

    I don’t understand the point you’re trying to make. Cower in fear of the miniscule sub-prime default fallout? Pay cash for everything? Buy gold?

    • 0 avatar
      J.Emerson

      “I don’t understand the point you’re trying to make.”

      I’ll give it a shot:

      “Chrysler sucks, as do all American auto companies. Oh, and the American economic recovery is totally illusory and based on hyperinflation and easy credit. Neither one of these things have to do with my hilariously off-base prediction of Chryler’s future some years ago or the fact that there’s a Democrat in the White House, I swear.”

      • 0 avatar

        I still don’t understand. I’m Canadian, so whoever occupies the White House is immaterial to me. Nor did I make any ” hilariously off-base prediction of Chryler’s future some years ago…” Your treatises, however verbose, make little sense.

  • avatar

    “Banks have been burned on mortgage loans …”

    “I am a total corp slut …”

  • avatar
    taxman100

    This doesn’t even include the smart ones who used their home equity line at a very low rate to get the tax deduction, and then negotiated to get the dealer to throw in their part of the credit buydown from the captive finance company towards the purchase price.

    That being said, things are going to get really ugly in this country when the next “great recession” hits in the couple of years.

    • 0 avatar
      bball40dtw

      Back in the pre-Carmegeddon days, I bought a car with a credit card. It was 0% for three years with no transaction fee. I had money in investments and savings that was doing much better. Now, the real rate of return on savings accounts is a negative number.

      • 0 avatar
        taxman100

        I recall doing things like that – taking out 0% credit cards, running them up and investing the cash, then paying it back 364 days later.

        The good old days.

      • 0 avatar
        Dr. Kenneth Noisewater

        I put my down payment, taxes and tags (about 8k) for my 2011 Volt on my Costco AMEX, and for the 2013 it was just taxes and tags (about 3k). Got some nice 1% action on those, and of course paid them both off in full before interest came due.

  • avatar
    corntrollio

    Still wondering if all we’re complaining about is credit score, when capacity to pay and collateral are just as important in underwriting a loan…

    The biggest problem with many loans during the real estate bubble were that they did not evaluate capacity to pay and collateral properly and assumed that credit score served as a proxy for the other two Cs. The modeling was wrong on that one.

    ::What the Freep doesn’t tell you is that banks are packaging auto loans into securities, just like they did with mortgages, and selling them to investors.::

    This isn’t really news and is sort of obvious. Securitization in itself isn’t the problem — securitization done poorly is.

    • 0 avatar
      bball40dtw

      Nothing like an interest only ARM on a $500,000 house with a borrower that doesn’t have the means to pay the payment once the ticking time bomb adjusts. Or 20% LTV home equity line at 9.5% so you don’t have to pay PMI. I miss working at banks before the economic meltdown. We were all doing insane things.

  • avatar
    J.Emerson

    A friend of mine just bought his first new car, a Fiesta. A recent college grad, with steady employment, an apartment, a good job, and student loans to pay down, there’s no way his credit score was in “prime” territory. But he qualified anyway for a reasonable rate, because any finance officer with a pulse could see that he was a good risk. As another poster has already pointed out, a credit score is only one measurement of risk, and hardly the last word on whether or not you’ll qualify for a loan.

    What this article is really trying to sell is the idea that evil, scary quantitative easing is driving the increase in subprime financing, and not a “genuine” improvement in the economy. So then it’s much easier to backspin the economic recovery and the improvement in the new-car market as just so much temporary inflation before the next (Obama-caused) crash. When you can include a dig at an American automaker too, that’s just icing on the cake. This is the meme that conservatives have picked up and ran with, as it becomes increasingly clear that their attempts to kneecap the economy through the sequester and the obstruction of Congress have failed. The truth about subprime financing is that a rising tide lifts all boats, and that economic growth and rising consumer confidence have much more to do with the boost in subprime than anything else. That the boost in subprime is benefiting Chrysler especially has got to really stick in the craw of certain authors who were shouting it’s demise with glee from the rooftops not that long ago.

    • 0 avatar
      bball40dtw

      I don’t think conservatives are the only party to blame for the sequester. Congress made a stupid deal in 2011 that they never thought would actually come to fruition.

      My biggest issue with the sequester, is that the Federal Government seems to be solving it with furloughs. They are also bent on scaring the American people into thinking we won’t have police officers and fireman available. They still have money for frivolous spending. Both parties have their pet projects that drain the budget.

      What they really should be doing is figuring out how to fix the issues with non-discretionary spending so we aren’t up a creek and without a paddle in ten years or less.

      • 0 avatar
        corntrollio

        ::What they really should be doing is figuring out how to fix the issues with non-discretionary spending::

        Yeah, but that would actually require intelligent thought and compromise. Good luck. The sequester was supposed to be a negative consequence for both sides that would encourage them to negotiate. It didn’t work.

        The real problem in our budget is not really things like unemployment insurance and food stamps, but long-term things like Social Security, Medicare, and Medicaid:

        ::http://www.businessinsider.com/government-spending-and-taxes-2012-12?op=1::

        This laid it out better than most places. Unfortunately, those things are hard to change, politically.

        • 0 avatar
          bball40dtw

          Last I heard more than 60% of the budget goes towards mandatory spending. I’m sure the Affordable Care Act increases this even more. Until we look at these programs and squeeze more efficiency out of them, cut benefits, or increase taxes nothing changes. As a country, we may have to do all three.

      • 0 avatar
        Big Al from Oz

        @bball40dtw
        The US government is spending billions of dollars unnecessarily.

        How much do the corn growers recieve? $125k – $250k per farm. Translate that in how much extra a gallon of gas should be costing you.

        The US dairy industry, how much subsidisation does it receive? When I was in the States over Christmas the news reports were harping on that if the dairy subsidy was dropped milk would cost $8 per gallon. My mother was paying about $3.50 a gallon.

        How much money is wasted in pie in the sky investments like Solyndra? EVs? Hybrids? How much has government bodies and authorities waste on these style of vehicles?

        How much has it cost the tax payers to save the Big 3 and other manufacturers with subsidised loans and bailouts?

        I’m not a big supporter of sub-prime loans. To me it means people are borrowing who shouldn’t be.

        The fiancial sector in the US has to become more responsible on how it manages itself. In the end it will be the nation that pays for the banks errors as has occurred in the past.

        I would let a bank fail and leave, actually any company that fails.

        If something is to big to fail then the government better have regulations in place to protect the country.

        • 0 avatar
          Power6

          All good points…well but the milk subsidy, $8 is not the fair market price of milk without subsidy it was a strange fiscal cliff situation, far more complex then that just google “milk cliff”

        • 0 avatar
          bball40dtw

          Al-

          You are right, but it doesn’t matter. Entitlement spending in the US dwarfs all other federal government spending. We could cut all discretionary spending and still be in trouble in 10 years. Millions or billions in waste are a fraction of the trillion dollar deficits in entitlement programs. Its like telling someone who can’t pay their mortgage not to have a Starbucks latte.

          • 0 avatar
            CJinSD

            They shouldn’t have a Starbucks latte if they can’t pay their bills. It is true. This is why we’re shafted, because people just assert irrationality as a reason for not taking responsibility.

          • 0 avatar
            Summicron

            We are a people dedicated to cushioning our worst and dimmest from the consequences of their irresponsibility.

            Brand new Chargers and Super-Dutys in the employee lot, constant collection calls to every one of our admin numbers the idiots gave out.

  • avatar
    jimbob457

    Ask your friends in the subprime lending business if they have stress tested their portfolios against the next recession. Maybe just a modest 12% unemployment rate in the USA and Canada.


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