Mainstream Press Finally Worried About Cheap Car Loans

Derek Kreindler
by Derek Kreindler

Months after TTAC started to relentlessly bleat about the glut of money flowing into the auto loan sector, the mainstream media is finally taking notice. Automotive News is finally expressing some worry over the factors that we’ve been discussing for some time: car loan terms are getting longer ( to help keep payments low), subprime lending is increasing and an expected rise in interest rates could put an end to the new car market’s exuberant performance.

This phenomenon is being primarily driven by low-interest rates, which allow consumers to finance vehicles cheaply, even as transaction prices creep upwards. Meanwhile, financial institutions are happy to provide the loans, particularly to those with poor credit, since they can be securitized and sold off to fixed income clients looking to get decent yields in the same low-interest environment.

The topic of auto financing has been rather divisive, to say the least, and we at TTAC remain bearish on the outcome, though the likelihood of any systemic risk seems to be diminished as OEMs choose to expand existing factories rather than build new ones. But we’re hardly alone anymore.

Derek Kreindler
Derek Kreindler

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  • Ruggles Ruggles on Oct 15, 2013

    RE: "Ruggles believes in a free market and so do I, but he believes in unregulated market, I don’t." I do NOT believe in free for all marketing. Capitalism requires a little socialism to save it from itself. As far as "profit motive" is concerned and what it says about me. I make no apologies for making profit on what I sell. NONE. Car dealers don't create the market they operate in. And no one forces consumers to buy at any price.

  • Ruggles Ruggles on Oct 16, 2013

    RE: "Author: Pch101 Comment: "The car dealership model is based on the profit motive." That remark reveals more about you than you realize." Reveals? As if I'm trying to hide the fact that dealers make an investment to make ROI. RE: "The dealership model isn't merely based upon the profit motive. It is also motivated by a desire to use disinformation to increase profits." There are plenty of regulations governing the auto business. Unfortunately, those regs cover dealers, not consumers. Dealers have compliance and regulatory people all over them. Some of them prevent dealers from fixing price so consumers can feel good about themselves and their deal. I think your complaint should be with the FTC. Or maybe you think the government should own the dealerships so consumers can get what they want? RE: "Apparently, you believe that any behavior is justified by the profit motive. The consumer's lack of knowledge of finance is regarded in the industry as a weakness that is to be exploited and that should be exploited, because the dealer deserves it." I believe any LEGAL behaviour is justified. I believe the seller has EVERY right to have a selling strategy just as consumers have the right to have a buying straegy. The sellers have much more stringent regulations focused on them. Consumers? Virtually none. RE: "You're not only a dishonest bunch, but you feel entitled to be dishonest. That sounds a lot more like sociopathy than a conventional business model." You get to shop until you find a dealer that satisfies you. Sorry if that's not good enough for you. 60 million vehicles will be sold this year. The VAST majority of these will involve selling strategy AND buying strategy. Call it what you want. Find me any other industry where consumers feel they have the right to the sellers cost information. Dealers didn't create the model. They exist in a market that is what it is. Complain to the FTC if you don't like it. Dealers really don't care if you disapprove of them making gross profit to pay their bills to survive and make ROI. But then, you've probably figured that out by now. But you're free to buy your own dealership and show us all how to run it. Go for it. You're so convinced you have a better idea you could make a fortune. Right? Think of all those happy customers. http://wardsauto.com/blog/people-love-their-dealer-hate-yours

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    • Ruggles Ruggles on Oct 16, 2013

      @Pch101 RE: "Author: Pch101 Comment: "Or maybe you think the government should own the dealerships so consumers can get what they want?" Your propensity for making strawmen arguments only makes you and your position look weak. I've told you my suggested remedy -- go back and read it." Refresh our memory. Was that the "Need a Nanny" card? RE "The sellers have much more stringent regulations focused on them." They aren't stringent enough, given the obvious success that dealers have in duping customers." Then try to pass legislation if you can make your case. MAke sure it applies to YOUR business too. RE: "You get to shop until you find a dealer that satisfies you." I doubt that there is a dealership in the country that would provide me with much satisfaction." Then I guess YOU are screwed. Over 30 million people each year find a dealer to satisfy them. Funny how the stats say consumers hate dealer although the like they one they just did business with. RE: "In any case, I'm not calling for satisfaction, but for fair disclosures." Define "fair." We already have Truth in Lending, Reg Z, Reg M, the FTC, state AG regs, etc etc etc. Consumers already have more information available to them than are any of their business. And yet there are still whiners like you. RE: "I would prefer that buyers be less ignorant." Sounds like a business model for you. Buyers are free to educate themselves AND they have information that is none of their business. and still there are those...... RE: "Of course, that suggestion frightens you because dealers rely on customer ignorance to increase their margins." Frightened? PLZ come in and take advantage of us.

  • Ruggles Ruggles on Oct 16, 2013

    I am through with TTAC. It seems in their zeal to sell advertising I am subjected to the most annoying pop up strategy ever. Some will tolerate. I won't. It may be a function of Google. Who knows.

    • Derek Kreindler Derek Kreindler on Oct 16, 2013

      Mr. Ruggles, Can you please elaborate on which ads are frustrating you? If you can identify them and let me know which ones caused you to give up on TTAC, I take this up with the people who are in charge of advertising displays. Feel free to email me derek at ttac dot com

  • Ruggles Ruggles on Oct 17, 2013

    RE: "Author: Pch101 Comment: "Then they will have to continue to be annoyed because the market auto dealers exist in is what it is." I agree. That's exactly why buyers should assume that car purchases are win-lose transactions, and should focus on price rather than on creating what is a worthless relationship. Dealerships are necessary for obtaining new cars, but they are not to be trusted." They get to shop until they are satisfied. What more do they want? RE: "My remedy is price fixing." Clear, simple disclosures with standardized contracts and paperwork that clearly indentifies the price and terms, accompanied by consumer-friendly explanations." Apple and Tesla can fix prices so no one has to worry about anyone getting a better deal than others. We can arrange that if you get it by the FTC. RE: "If you can figure out a way for car dealers to make a 10% gross profit per transaction" It's not my job to worry about your margins. That's your problem -- I care about the consumer." I never said it was your job to worry about. You already have more information than you deserve. We'll get what we need. Don't worry about that. BTW, in a chat with Scott Painter yesterday, it turns out he was forced to change his business model. His model now includes helping his client dealers make money. Imagine that. He figured that out all on his own after hundreds, if not thousands, of dealers cancelled their TrueCar relationship.

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