By on March 29, 2017

keys car sale

A third of all subprime car loans are now being categorized into the ominous-sounding “deep subprime” group. The designation has become progressively more inclusive since America clawed its way out of the recession and now accounts for 32.5 percent of all high-risk loans — up from just 5.1 percent in 2010.

While consumers have fallen behind on most subprime auto loans, the deep classification is responsible for the most serious cases of nonpayment. Delinquencies surpassing 60-day periods have tripled since 2012 and indicate little sign of stabilizing. 

“The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” Morgan Stanley financial strategists wrote in a recent report. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

Morgan Stanley defines deep subprime borrowers as lenders with FICO scores below 550. The Fair Isaac Corporation doesn’t have a strict categorization for the group, but the general consensus is that anyone with a score below 600 is considered a high risk. That’s a problem as younger buyers typically have lower scores and are less interested in making the kind of financial decisions that might raise their ratings. They’re also less likely to have a steady income or cash reserves, but they’re flooding into the market as comparatively well-off boomers leave it. Someone has to drive the new cars being produced every year, and used vehicles still remain at a premium.

The $3 billion cash-for-clunkers program from 2009 obliterated the cheaper end of the used vehicle market to the detriment of America’s lowest income earners as used vehicles they could have afforded were largely removed from the market. This forced those buyers to scrounge enough money together to buy something more expensive or risk going deeper into debt by taking out a loan they might never be able to afford.

Banks have also become more willing to underwrite riskier auto-loan asset-backed security sales. According to Bloomberg, that translates to investors taking a huge hit, with about $8 trillion of debt globally carrying negative yields, further facilitating higher levels of risk in the securities market. It’s a bad time to be unprofitable. Used car prices are expected to come down soon and new car sales seem to have plateaued.

Subprime consumers won’t care if lenders get screwed. All they want is a used Nissan Altima that won’t require them to take on a massive loan, because the alternative isn’t pretty.

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185 Comments on “‘Deep Subprime’ Auto Loans are Becoming the New Normal...”


  • avatar
    2drsedanman

    No way this is going to end well. The next bubble to burst. Followed closely by, or simultaneously with, student loan debt.

    • 0 avatar
      dal20402

      If a “bubble” bursts here (which would mean a significant decrease in used car prices), all that happens is that some institutional buyers of highly risky securities (i.e., hedge funds) will lose their money, and independent BHPH operators that don’t sell their loans may lose a few percent.

    • 0 avatar
      Land Ark

      The problem with the housing bubble wasn’t that the home loans were subprime and high risk, it’s that they were high risk and repackaged and sold to others as prime loans. The bubble burst when people started going looking for their money and found out there wasn’t any.

      In this situation they appear to be packaged appropriately and people buying the risk know what they are getting into. Risk averse investors stay away from them, just like they would have done with the housing bubble if provided the real values of the packages.

      So if everyone defaults on these loans, the interest rates and down payments combined with the repos should make up most of the difference.

    • 0 avatar
      Krivka

      There is a bubble, but the bubble is caused by capitalism itself, or maybe mire accurately, American Capitalism.
      Most people do not understand the capitalism model whereas the labor is fluid and is paid appropriately for the labor performed and production is based on the consumer and market needs or wants. When the government or corporations fix the market to limit the power of labor to increase Capital’s profits the model collapses. After WWII the USA was the manufacturer of over 45% of the entire worlds goods. WE MADE EVERYTHING because the war destroyed factories in Asia and Europe. Along with a strong labor union movement and the VA, Americans were able to buy things like cars, houses, farms and all other things that made us think we were special. Men could quit a job in Cleveland and find a better one with better benefits the same day. One income provided a good living and more. Now the chickens are coming home to roost. Europe and Asia have an infrastructure 40-100 years newer than the antiquated systems in the USA. Trump promised jobs to people who never worked or had an opportunity to work. But the Democrats sat on their hands as well not detailing the problems or offering solution because their isn’t one. People who make enough money to buy a car or a house will buy a house or a car. Not both. The uneducated population of this country demand well paying jobs to get back to the economic position they thought was a promise to them, they are not getting it back and the automobile market may got the way of the cliched “buggy whip”. People cannot afford a 30k car when their salary is 30k or less/year. I used to be for the government keeping their hands off the scale, but now it is too late. The labor part of capitalism is done. We are drones with no power whatsoever in the scheme. Capitalism is deader than socialism.

      • 0 avatar
        Whatnext

        Yep, all those who were seduced by the cries of MAGA should be looking at the American economy pre-WWII as their guide, not the postwar anamoly. Except instead of scrabbling down on the farm for low wages, they’ll be doing it at Walmart.

      • 0 avatar
        Superdessucke

        Nah. The government just has to make financial disincentives to use cheap overseas labor, i.e. tariffs.

      • 0 avatar
        thornmark

        >>Capitalism is deader than socialism.<<

        Socialism needs capitalism to feed off. If capitalism (the host) is dead, then socialism (the parasite) is too.

        That's why wise socialists make sure they don't kill the productive (capitalistic) part of society.

        See Venezuela – a rich country turned socialist hell that Bernie Sanders wanted no reference to in the last campaign.

  • avatar
    sutherland555

    So a few years from now, if you’re in the market for a cheap and poorly maintained newish car, win?

  • avatar
    sirwired

    “Subprime consumers won’t care if lenders get screwed. All they want is a used Nissan Altima that won’t require them to take on a massive loan, because the alternative isn’t pretty.”

    But ARE the lenders getting screwed? If you are concerned about the banks and loan owners involved (I’m not), all that matters is if losses, after repossession, exceed the amount of interest collected. Since these loans are crazy-expensive to begin with, they can absorb an awful lot of losses.

    “That’s a problem as younger buyers typically have lower scores and are less interested in making the kind of financial decisions that might raise their ratings.”

    Young buyers don’t car about credit scores vs. older folk when they were that age? Says who? Please tell me there’s more behind this than “Kids these days…” grumbling.

    “The $3 billion cash-for-clunkers program from 2009 obliterated the cheaper end of the used vehicle market to the detriment of America’s lowest income earners as used vehicles they could have afforded were largely removed from the market.”

    I think it’s a little late to be blaming Cash for Clunkers for anything; that not-particularly-large program (which didn’t even apply to any ‘ol older car) got rid of a bunch of crap-mobiles nearly a decade ago. I’m pretty sure the market has caught up by now.

    • 0 avatar
      jkross22

      “I think it’s a little late to be blaming Cash for Clunkers for anything”

      Yes, let’s ignore the consequences.

      This is a supply/demand issue. Eliminate supply, prices go…?

      This is high school economics. Is that still being taught?

      • 0 avatar
        FormerFF

        Of the 655,000 vehicles that were removed by Cash for Clunkers, they overwhelmingly would now have been 20+ years old and would have been removed from the road anyway. If there is a shortage of older, lower priced used cars, and I see no evidence that there is, it was exacerbated by the low sales rates of new cars following the Great Recession.

        • 0 avatar
          John-95_Taurus_3.0_AX4N

          My car is over 20 years old and not “removed from the road”. Far from it.

          I’ll say it again: NOT EVERYONE LIVES IN THE SALT BELT.

          Go to Seattle (or any large West/South West metro area) craigslist and search for cars over 20 years old, and then come here and tell me there are none left with a straight face.

          In the deep South (LA as in Louisiana and not Los Angeles, for example) there are fewer than out west, as the climate takes its toll on cars. They deteriorate quickly with warped or cracked dash, ruined paint, brittle plastic, etc. Scrap metal prices are also higher here than out West. I got $50 for a Datsun Sentra in Washington for scrap and $350 for a wrecked 1989 with no engine later that year down south.

          So when your 1997 Boneville looks like a rolling pile of garbage, its 110° everyday with 90% humidity and the A/C quits along with the power windows, and THEN it has some issue, its easier to junk the car than to repair it.

          You will only get a couple hundred less by scrapping it vs. selling it, and it’ll be over in one day instead of one month of a train of strung-out losers coming to your house, wasting your time kicking the tires and trying to get you to give it to them for nothing. You can’t really blame them, its a pile of junk, the fuel in the tank is the most valuable part of the whole mess.

          I have seen people junk cars with a bad fuel pump or alternator or such as that. A fuel pump on a Plymouth Acclaim isn’t expensive or difficult, but if its already in poor condition cosmetically, has some other issues and such, most won’t bother trying to repair it or part it out. They’ll do what most of the “instant gratification” people do, squish it and go buy an Altima that will be in the same boat in probably less time than the Plymouth was, because at least the Plymouth had an owner that gave a crap for its first 15 years on this planet.

          The cars of that age that are NOT junk, however, fetch incredible money. Why can you get $3500 for a 1998 Accord with 240k on it down South? Because its been cared for so its not junk, and there is great demand for DECENT affordable cars due to a lack of supply.

          The C4C program took cars in relatively good condition off the road. How do I know? Because if you can afford to buy a new Ford Escape (even with the discount), chances are you could (and did) afford to keep your 1997 Explorer in good condition. It is unlikely that it was truly a beater near the end of its life being driven by a meth zombie that deserved to be crushed anyway. Subprime new car loans were not as common then, you pretty much needed to be able to afford a new car in order to get one. Not only that, but you had to have owned and insured it for so long, etc, and usually true roach cars are rarely insured and get passed around like the flu in a 1st grade classroom.

          Now, hypothetically, I’m a single dad and I want a practical vehicle for my family, and I don’t want/can’t get a loan. Should I buy this one-owner 1997 Explorer with 130k that runs and drives great with good maintenance history? Oh, I can’t, its now a Chinese-built refrigerator, so I’ll be forced into whatever else is available in my price range, taking that car out of someone’s grasp who isn’t as well off as I am, so he’s forced to buy something else and so forth.

          Its a trickle down effect. You have 99 items and 99 people ready to buy them, OR you have 80 items and 99 people ready to buy them. How does that supply/demand thing work again?

          Face facts, C4C, just like Obamacare, was a bad idea that continues to cause people issues to this day. It was short-sighted and poorly implemented. No excuse for it.

          “If there is a shortage of older, lower priced used cars, and I see no evidence that there is, it was exacerbated by the low sales rates of new cars following the Great Recession.”

          So, you think people who would normally be buying that hypothetical 1997 Explorer for cash can afford to buy a 2009 instead if there were only more of them? Lol. Out if touch doesn’t begin to describe that lunacy.

          • 0 avatar
            DenverMike

            There’s never been a better time to own a 20+ years old car/truck (not from the rust belt). So much that I fear upcoming “backlash” against automakers and regulators. I think it’s already happening.

            For the price of a boring mid-spec, middle of the road “appliance”, you can a get low-miles or functional/cosmetically restored, 400 hp crate engine IROC-Z “resto-mod”, for example, with full emissions, ice-cold A/C, etc, if you want? Just swipe a card.

            I know I’m seeing owners pour 10’s of thousands into older, late ’80s on, pickups, Blazers, Suburbans, Wranglers, Cherokees, etc.

            Unless you’re a wet noodle, fraidy cat, why not have a little fun, while saving 10’s of thousands, vs dumping it all into a quickly depreciating “asset”, with tons of built-in obsolescence, you really don’t want to be stuck with after the lease?

          • 0 avatar
            sirwired

            This was cars that had a value no greater than $4,500. The number of cars that would have cost you no more than $4,500 at the time that would still be on the road today is not high.

            And even if every single one of those vehicles was a bargain-priced garage queen (and this most certainly wan’t the case; most C4C cars were not in spectacular shape), it was 644,000 cars nearly ten years ago. Any measurable distortions that might have made in the market are long gone.

            I won’t argue that the program was a good idea; it wasn’t. But I will say that it’s bizarre to still be blaming anything in particular about it, given how long it’s been.

          • 0 avatar
            PandaBear

            The way I see it, there’s no money in making cars during 2009, so the market would be either 1) removing old cars so there would be new cars on the road, or 2) do not make new cars but keep the old cars around.

            C4C is 1), the market downturn is 2), the overall market is a combination of the 2 but without people buying new cars back in 2009, there would have been no used cars to buy today anyways.

            It’s the market, that’s all.

      • 0 avatar
        sirwired

        Again, the program was nearly a decade ago. The calendar, is it still being taught?

        Pretty much all of those cars would be in the junkyard a while ago now.

      • 0 avatar
        FreedMike

        The “consequences” were largely over a long time ago.

    • 0 avatar
      highdesertcat

      “I think it’s a little late to be blaming Cash for Clunkers for anything;”

      C4C is a YUUUGE contributor to the state of new/used car affairs in the US today, such as they are. Even with a new administration, things haven’t changed much for the vast majority of US citizens. At this point, many are hoping and wishing for the best.

      But things are changing, both in the US economy and with the forecast SAAR, which will affect new/used car sales availability and pricing during the next 5 years.

      If more people find work that elevates their income and self-confidence, even these “Deep Subprime” loans can be absorbed into the cost of doing business.

      Then again, I’m not optimistic that the current wielders of power in the US government will elevate above their infighting and political blocking of the opposition’s ideology to actually get something accomplished for The American Citizens.

      The recent failure of the repeal and replace effort told the whole story in a nutshell. Nothing else will get done in DC that will alter the status quo.

      No tax code rewrite either. Mostly, Executive Orders. And we’ve already see a bunch of those.

      The American Citizens will be the big losers, as always.

      Yet we deserve everything we get. Because we vote for it.

      • 0 avatar
        FreedMike

        The problem isn’t the “opposition’s ideology.” The problem is that the people in charge are ideologues who haven’t figured out that “standing on ideological principle” is a good way to make sure nothing ever gets done. Well, they’re figuring it out now. What they do with this knowledge is anyone’s guess. My bet’s on more of the same. This is the way the GOP was prior to Trump’s election, and nothing has changed.

        Put differently: if you wonder why so little got done over the last six years or so, you have your answer now…and it wasn’t “Obama.”

        • 0 avatar
          highdesertcat

          FreedMike, I agree with what you wrote. But relationships among legislators has also devolved from what it used to be to what it is now.

          So, like I said, We, The People, are responsible for electing the representatives we choose to send to the Hill.

          • 0 avatar
            FreedMike

            …and the problem is that We The People have been fed a constant diet of garbage from the special interests. These folks aren’t interested in anything but protecting their own interests, and the status quo. Thus, we get the (lousy) ballot choices we get. I’m not sure why we’re surprised when they prove how lousy they are once they’re in office.

            Until the money’s drained from special interests – and I mean special interests on BOTH sides of the aisle – then this won’t change. If Trump wants to “drain the swamp,” he should focus on campaign finance reform. And whatever his other failings may be (and they’re legion), I’d back him on that issue.

          • 0 avatar
            highdesertcat

            FreedMike, I agree. That’s why so many people have pinned their hopes and dreams on Mr Trump when he was in the running.

            They voted for change.

            But they won’t get it. No one is going to help Trump.

            No one wants to shoot themselves in the foot like Quickdraw McGraw. And that’s why repeal and replace failed, just like John Boehner predicted.

            The differences within the Republican Party are truly insurmountable, and have been that way for decades.

            That’s also why we will never see a rewrite of the tax code.

            The ‘crats aren’t even players. Not worthy of mention or even consideration. The GOP infighting is destructive enough.

      • 0 avatar
        notwhoithink

        The TL;DR:

        “You’re wrong! C4C has a YUUUGE impact on the state of the automotive industry today, and here’s several paragraphs that do nothing to explain why or back up that statement in any meaningful way!”

      • 0 avatar
        sportyaccordy

        How could less than 1% of cars on the road- most of which got abysmal gas mileage at a time when gas cost ~$4/gallon- have a “YUUUUGE” effect on used car prices?

        I’m pretty sure the new car market contracting by nearly 50% in 2009 and slowly recovering back to record levels is what is the major factor, and that had nothing to do with C4C. C4C was a stupid program that didn’t work, as evidenced by the near collapse in the auto market that continued through its procession, but the used car price bubble today is 100% driven by the low NEW car sales over the recession. ~12 million >>>>>>>>>>>>>>>> ~600 thousand, at least by my math.

      • 0 avatar
        JimZ

        “Then again, I’m not optimistic that the current wielders of power in the US government will elevate above their infighting and political blocking of the opposition’s ideology to actually get something accomplished for The American Citizens.”

        none of those s**tsacks in D.C. care one whit about “accomplishing anything for The American Citizens.”

        • 0 avatar
          highdesertcat

          Amen, JimZ.

          That’s why so many American citizens place themselves and their interests first!

          One such contingent is the staggering number of US-citizen expats currently living in Mexico, Ensenada to be exact. But also the ones residing in Europe and Canada.

          Many of those successful Americans chose to leave the US during the last administration.

          Many of those I talked with in Ensenada said they would move back to America if Trump achieves the things he promised his supporters. Like lower taxes. Maybe build that wall. Level the playing field for American businesses.

          But I don’t think Trump will be able to get much done during these first two years UNLESS the Republicans all get on the Trump bandwagon and sing the same songs.

    • 0 avatar
      notwhoithink

      “I think it’s a little late to be blaming Cash for Clunkers for anything”

      Finally, someone talking sense. I know the folks here like to blame C4C for all of the ills in the automotive sector, but that ship has long since sailed. C4C was 8 years ago, and only took about 690,000 cars off the road. Most of those were cars that were barely on the road in the first place. More to the point, any of the new cars that they were replaced with would likely now be close to a decade old, old enough to be a modern day C4C car (if such a thing existed).

      In the 8 years since C4C there have been nearly 50 million new cars sold in the US, most of which are now very well-used. And that’s before you consider the roughly 30 million cars that were sold in the 5 years preceding C4C that were still in use and on their first owner at the time. So that’s about 80 million used cars that were sold new in the past 15 years, and people want to complain that taking less than 1% of them off of the market is somehow still screwing with the used car market nearly a decade later?

      • 0 avatar
        FreedMike

        This.

        The people who rail against C4C are the same ones who railed against the auto bailouts. They have an ideological axe to grind. But if their fondest ideological wishes had come true, and GM and Chrysler had just gone down the tubes (along with all their dealers, as well) to prove the worth of “the market,” they’d have no doubt blamed that on an unnamed guy who used to live at 1600 Pennsylvania.

        • 0 avatar
          markf

          Sounds like you have the “ideological” axe to grind. GM would not have “gone down the tubes” they would have filed for bankruptcy, reorganized, downsized but will still have been around. But if this would have been allowed to happen then the Dems would not have been able to pay back the unions by screwing the bond holders…….

          • 0 avatar
            Drzhivago138

            ” they would have filed for bankruptcy, reorganized, downsized but will still have been around.”

            And you know this how?

          • 0 avatar
            05lgt

            no one was willing to buy the “reorganized” company. that was the whole problem.

          • 0 avatar
            FreedMike

            Newsflash, markf…GM was *********$90 billion********** in debt at the time of the bankruptcy. Now, who was going to even provide them with debtor-in-possession financing to get them through it? Who even HAD ***********$90 billion********** to lend in 2008?

        • 0 avatar
          ToddAtlasF1

          Do the people who think C4C is irrelevant to today’s fleet makeup and market have any idea what the average age of a vehicle on US roads climbed to under the Obama regime? It’s like some people have a filter that allows them to reject any fact they’re confronted with and become one with every lie they’ve ever heard.

  • avatar
    Lou_BC

    MAGA is rapidly becoming maggot infested.

    • 0 avatar
      SCE to AUX

      I’m not defending Mr Trump or blaming Mr Obama, but this high-risk auto loan thing didn’t start in January.

      • 0 avatar
        highdesertcat

        Yup, I remember ttac articles about subprime loans and loans for 10 years.

        This has been an on-going problem and I believe more jobs are the answer.

        I’m also not optimistic that anything will get done in the US Congress that will stimulate the US economy and create more jobs.

        There’s just too much division within the ruling party.

        Bad governance affects everyone living in the US. And it could potentially spill over into relationships with trading partners.

        • 0 avatar
          FreedMike

          More jobs is one part of the answer.

          More transit is another. Poor folks – your prime source of bad-credit borrowers – are going to be financially compromised by their very nature. When your monthly budget choices are a) pay the light bill, or b) pay for groceries, a 720 FICO score is NOT going to be the outcome. But these folks still need to work, and to do that, they are going to need transportation. More transit options would be a blessing for them, and would probably help them stay off the welfare rolls as well.

          It’d also greatly alleviate the problem of uninsured drivers Jack was talking about not too long ago. Someone who can’t afford a car AND insurance has no business on the road, and presents a financial risk to everyone else. They belong on buses until they can truly afford car ownership.

          • 0 avatar
            highdesertcat

            FreedMike, more transit would work well for areas where it can be applied.

            But not in the rural Southwest where many people’s daily commute is ~200 miles round trip.

            Know several people who do.

          • 0 avatar
            FreedMike

            True, and I’m not sure what you do about someone in that situation. But in cities – where the vast majority of poor people live – it would be a big help.

          • 0 avatar
            sportyaccordy

            hdc, truly autonomous vehicles can’t come soon enough. Public transportation unencumbered by fixed routes would be a godsend for poor rural/suburban folks. A pay per ride system would skip all the financing/repair costs and enable people to be mobile. Win win.

            As is though I don’t see a solution, and I imagine access to transportation is a driver of the cycles of poverty outside of cities with good PT coverage.

          • 0 avatar
            markf

            “More transit options would be a blessing for them, and would probably help them stay off the welfare rolls as well.”

            What? Me paying for some guy to take the bus will reduce welfare?

          • 0 avatar
            Drzhivago138

            “What? Me paying for some guy to take the bus will reduce welfare?”

            1. Not just you, everybody. Everybody chips in half or 2/3 of a cent and suddenly you’ve got some real cash.

            2. Not just “some guy,” a /group/ of fellow human beings.

            3. Money they’re not spending on insurance and gas for an older, less efficient vehicle can go towards things like food, so that money doesn’t have to come out of welfare.

          • 0 avatar
            FreedMike

            “What? Me paying for some guy to take the bus will reduce welfare?”

            Yep, it will. Think about it.

          • 0 avatar
            JimZ

            “What? Me paying for some guy to take the bus will reduce welfare?”

            yes, if it means they have a way to get to work.

            You lot are incredibly penny wise and dollar f**king stupid.

      • 0 avatar
        notwhoithink

        “I’m not defending Mr Trump or blaming Mr Obama, but this high-risk auto loan thing didn’t start in January.”

        Well…the banks are making sub-prime/high risk loans and then bundling and securitizing them so they can sell them on to investors. That’s more or less exactly what they did with the sub-prime mortgage market, so I guess we should blame…THE BANKS!

        • 0 avatar
          markf

          “3. Money they’re not spending on insurance and gas for an older, less efficient vehicle can go towards things like food, so that money doesn’t have to come out of welfare.”

          LOL, so you 100% certain in your assumption that these folks are poor because their expenses are high and not because they suck with money, or are drug addicts, alcoholics or generally don’t care because Uncle Sugar is there with the EBT card every month.

          So they are gonna poor those massive savings of taking the bus into food and rent and not $600 Smart Phone, tattoos, cigs or any of the other normal accoutrements you see welfare folks spend their money on…..

          • 0 avatar
            Drzhivago138

            So you are 100% certain in your assumption that these folks are poor because they’re lazy, drug-addicted, and/or waste their EBT money on luxuries? I’d like to see some data on that, if you don’t mind.

            It has been well-documented that the working poor spend a higher percentage of their income on transportation in the form of personal cars, and it’s usually older, less-efficient models at that.

            BTW, feel free to reply to comments in the correct comment chain.

          • 0 avatar
            JimZ

            you’re forgetting that people with markf’s mindset believe that poor people deserve to be poor, rich people deserve to be rich, and the middle class are all a bunch of “temporarily embarrassed millionaires” who are one bootstrap away from being rich.

          • 0 avatar
            highdesertcat

            ” people with markf’s mindset”

            Maybe not. Maybe many tax-paying people are just tired of picking up the tab for freeloaders who never did an honest day’s work.

            I do believe that change is in the wind though. When Clinton was in office he attached a work-requirement clause to all the welfare that was being dished out, and that resulted in a bunch of recipients dropping off the welfare rolls.

            I would not be surprised if the Trump-Ryan-McConnell troika will do the same. And real soon, like maybe 1 October 2017.

          • 0 avatar
            JimZ

            “Maybe many tax-paying people are just tired of picking up the tab for freeloaders who never did an honest day’s work.”

            I’m sure you’re saying this from the safety of your McMansion in your lily-white, gated, HOA-encumbered community. Well away from anyone even near the poverty line.

          • 0 avatar
            OldManPants

            “Well away from anyone even near the poverty line.”

            Unless he’s lurking in a Walmart lot for upskirt shots.

            Hey, it all pink on de inside!

      • 0 avatar
        Lou_BC

        SCE to AUX – My comment was meant to be a *partial* shot at the current administration. Make America Great Again isn’t going to happen as long as there isn’t “government of the people, by the people, for the people.”
        All we have is “government of the rich, by the rich, for the rich.”

        That has been going on much longer than the current administration. My issue is that the *current” administration ran on the premise that they would change things for the people. I knew that wasn’t going to happen.

        “Drain the swamp” has just been an exercise is rotating the reptiles and dumping more toxins into it.

        • 0 avatar
          FreedMike

          True, Lou, but as subprime as the current president is, I don’t see the connection between him and subprime auto loans.

          • 0 avatar
            Lou_BC

            FreedMike – I’m looking at the bigger picture. Deep sub-prime is just one symptom of the disease.
            To get out of the need for sub-prime loans, you need a stable workforce. Changes in technology means that unless government invests in getting the workforce trained to compete in the current workplace or emerging workplace, you won’t see stability.

            Otto Von Bismarck in 1884 said, “The actual complaint of the worker is the insecurity of his existence.” “He is unsure if he will always have work, he is unsure if he will always be healthy, and he can predict that he will reach old age and be unable to work.”
            That sums up most of why people voted for twitterpotus and that sums up why the populace is angry at politicians.
            Twitterpotus isn’t responsible for sub prime loans but has claimed responsibility for coming up with a cure for the disease that warrants it.
            Another point is the deregulation of the financial markets will increase the odds of the system imploding like it did in 2008.

            All people want is stability and everything I have seen so far politically is lessening stability for the working man.

            That may not have caused the original need for “deep sub-prime” but it sure as hell is going to feed the beast.

          • 0 avatar
            Arthur Dailey

            @Lou: that Bismark quote is a good one. Think that I am going to appropriate it. Below is a link to an article demonstrating the insanity of the American ‘War on Drugs’ and the destruction wrought by limiting the rights of workers in favour of employers.
            http://www.cnn.com/2017/03/27/us/refugees-jobs-drug-testing/

          • 0 avatar
            Lou_BC

            Arthur Dailey – thanks. It was relevant in 1884 and is relevant now.

          • 0 avatar
            FreedMike

            Well, Arthur, now you know why this Coloradan won’t touch weed. In this economy, I am NOT going to put myself out of the workforce to get high, whether it’s legal or not.

            @Lou:
            Thanks for the thoughts. We’ll see how this goes, but for now, I’m inclined to agree with you. Unfortunately, people do silly things when they’re scared and desperate, like voting for a guy who’s clearly going to screw them over.

        • 0 avatar
          SCE to AUX

          @Lou_BC: Thanks for the clarification.

          I voted for Mr T hoping that he would serve as a citizen President, appealing to the people who elected him. I still wish for such a candidate, but without all the baggage this administration clearly has.

          If we face Carpocalypse 2.0 in the next few years, likely accompanied by another housing collapse and recession, Mr T’s reelection will depend on how he handles it. But honestly, that may be the least of his worries given the daily drama he produces.

          • 0 avatar
            markf

            “Unfortunately, people do silly things when they’re scared and desperate, like voting for a guy who’s clearly going to screw them over.”

            You still don’t get it, which is why Trump will be reelected……..

          • 0 avatar
            Lou_BC

            @markf – if you read what has just been posted, it indicates that many “do get it”.

          • 0 avatar
            highdesertcat

            “which is why Trump will be reelected……..”

            I didn’t vote for Trump last November but I WILL vote for Trump in 2020 IF Trump can keep the promises he made to the people who got him elected.

            And at this early juncture, 70-days in, that is in serious doubt because of all the factions working against Trump, to include the Far Left Mainstream Media, the Liberal Judiciary, the infighting within the Republican Party and the Party-of-NO ‘crats.

            All that’s left for Trump is a phone, a pen and Executive Orders.

            Hmmmmmmmmmmmm, where have we heard that before…….

          • 0 avatar
            Lou_BC

            “Far Left Mainstream Media, the Liberal Judiciary”

            Yes, judges striking down religion based discrimination is as liberal as it gets.

            I guess Russia is on the left side of the spectrum.

        • 0 avatar
          05lgt

          partisan redistricting invariably leads to extremists in office and moderates eliminated. I just don’t see how the extremists will ever see fit to abolish partisan districting and use something arbitrary and uncontrollable so the moderate majority can have a voice in government.

          • 0 avatar
            Lou_BC

            @05lgt – “everything in moderation”

          • 0 avatar
            markf

            “Yes, judges striking down religion based discrimination is as liberal as it gets. ”

            Show me where any religion is mentioned in any immigration executive order?

            Of course I am sure you were just as sanctimonious and self-righteous when obama ordered the same thing in 2013……

          • 0 avatar
            highdesertcat

            “Show me where any religion is mentioned in any immigration executive order?”

            This is just a “crat” political thing. Resist and obstruct.

            Last cycle the Republicans were the party of NO. This cycle the ‘crats are the party of NO. Seems only fair.

            The big losers are, of course, the American citizens because, again, nothing will get done in Congress this cycle either.

            Look for a government shutdown sometime late next month unless a miracle happens.

            I would be surprised if Trump will be able to accomplish anything of lasting value beyond his term in office, in view of his own Republican “allies” sabotaging the promises Trump made to the people who elected him.

            On the Republican side, Ryan and McConnell both fought Trump tooth and nail prior to Nov 8, until they could fight Trump no longer ’cause the guy got elected.

            Why would anyone expect the Republicans to back Trump now?

            The best we can hope for is a lot of Executive Orders for the duration of Trump’s presidency. Effective for the duration, but not lasting.

            After all, 70 days have elapsed and nothing of consequence has been accomplished during this traditional 100-day grace period for a new president.

            Who didn’t see this coming?

        • 0 avatar
          markf

          you’re forgetting that people with markf’s mindset believe that poor people deserve to be poor, rich people deserve to be rich, and the middle class are all a bunch of “temporarily embarrassed millionaires” who are one bootstrap away from being rich.

          Who sad the poor deserve to be poor? You, not me.

          The fact is “poor” in America have it pretty good; subsidized or free: healthcare, food (most are obese) housing, utilities, phones, transportation.

          So if these programs are designed to help people out of poverty then why have the welfare grown so immensely under obama?

          • 0 avatar
            Lou_BC

            The first judge that struck down the initial twitterpotus ban was appointed by President George W. Bush.

            The 2nd time around the judge used putinspotus public comments about “Muslim Ban” as evidence that the motivation was religion based.

            “But in a pointed decision that repeatedly invoked Mr. Trump’s public comments, Judge Derrick K. Watson, of Federal District Court in Honolulu, wrote that a “reasonable, objective observer” would view even the new order as “issued with a purpose to disfavor a particular religion, in spite of its stated, religiously neutral purpose.”
            Judge Derrick K. Watson – appointed by President Barack Obama.

            The 2nd judge to block the ban: Theodore D. Chuang appointed by President Barack Obama.

            ““The history of public statements continues to provide a convincing case that the purpose of the Second Executive Order remains the realization of the long-envisioned Muslim ban,” Chuang wrote.”

            All three judges felt that the ban was unconstitutional.

          • 0 avatar
            Lou_BC

            “The fact is “poor” in America have it pretty good; subsidized or free: healthcare, food (most are obese) housing, utilities, phones, transportation.”

            You ever hear of malnutrition?

            I know a Dietitian who tried to live on social assistance level income for 6 weeks and she tried to do it by eating healthy. She lost a ton of weight and found it virtually impossible. Now this is in Canada where we tend to be more socially generous than the USA.
            Another factor is the ability to access healthy food. There is a reason why MacDonalds sets up shop in poor and lower middle class neighbourhoods.
            Another factor with obesity is education and wealth. The more wealthy you are and better educated you are, the less obese you tend to be.
            Do you want me to get into statistics covering direct indicators of well-being like life expectancy,infant mortality, risk of homicide, and risk of incarceration?
            It is convenient to look at low income cut-off lines and/or funding/benefits for the poor since they pain a rather simplistic picture.

            I’d like to see the data and research you have backing up your claim: “The fact is “poor” in America have it pretty good”.

          • 0 avatar
            markf

            3 judges do not a Constitution make. 3 activist judges who are democrats with robes. Out of 50 muslim countries in the world, 6 countries were temporarily stopped for 60 days. The word muslim is nowhere in any order. These are people who are hell bent, along with the media, and the world’s elitist in stopping anything Trump does.

            News Flash there is no constitutional right for some Somali, Yemeni, Brit or any else to enter the US.

            “You ever hear of malnutrition?”

            I’ll worry about it when I see the “poor” stop getting inked, stop buying expensive Smart Phones, Video Game consoles, Cable TV, AC, Cigarettes, Drugs and Booze.

            Look at pictures of the poor from 40, 50, 60 years ago, they were not obese. I suppose that is McDonalds fault, after all people are routinely forced to eat there.

            I don’t need studies or data to back up my claim, go any 3rd world hellhole, look at how 99% of them live then look at the “poor” in America, they have to pretty damn good…….

          • 0 avatar

            The first Judge is or was a registered Republican and used to be quite active in the Party in the pacific NW.

          • 0 avatar
            Lou_BC

            “3 activist judges who are democrats with robes.”

            1st judge was appointed by George Bush.

            Oh and you missed the quotes I provided:

            ““But in a pointed decision that repeatedly invoked Mr. Trump’s public comments, Judge Derrick K. Watson, of Federal District Court in Honolulu, wrote that a “reasonable, objective observer” would view even the new order as “issued with a purpose to disfavor a particular religion, in spite of its stated, religiously neutral purpose.”

            “The history of public statements continues to provide a convincing case that the purpose of the Second Executive Order remains the realization of the long-envisioned Muslim ban,” Chuang wrote.”

            Both judges cited comments he made about a “Muslim Ban”.

          • 0 avatar
            Lou_BC

            “I’ll worry about it when I see the “poor” stop getting inked, stop buying expensive Smart Phones, Video Game consoles, Cable TV, AC, Cigarettes, Drugs and Booze.”

            Citations required.

            Not all poor make bad choices with their finances.

            Where is your evidence that this occurs on a daily basis?

            Do you work with the poor?

            Do you live in an impoverished neighbourhood?

          • 0 avatar
            markf

            “1st judge was appointed by George Bush” and Souter was appointed the First Bush and Roberts appointed by the 2nd Bush. What’s your point? GWB only appointed Right Wingers? See above.

            “Citations required”
            “The poor still smoke, while the affluent have largely given up the habit.”

            https://www.washingtonpost.com/news/wonk/wp/2015/04/14/where-the-poor-and-rich-spend-really-spend-their-money/?utm_term=.26d8db09569c

            http://www.bxscience.edu/ourpages/auto/2010/5/13/44313724/TATTOOS.pdf

            “Not all poor make bad choices with their finances.” Then why are they poor?

          • 0 avatar
            Lou_BC

            @markf – the irony of this whole discussion is this; there was a time when I believed all of the same things that you did.
            I spent a large portion of my life working with people with drug addiction, alcoholism, mental health and psychosocial problems. Oh and those one would consider poor or destitute.
            When I held your beliefs it created cognitive dissonance in the realm of morals and ethics. I could not continue to hold the same beliefs about the poor and those with drug/alcohol and other lifestyle related disorders since I saw first hand that those beliefs were false. Education made that dissonance worse. It ate me up inside.

            “I’ll worry about it when I see the “poor” stop getting inked, stop buying expensive Smart Phones, Video Game consoles, Cable TV, AC, Cigarettes, Drugs and Booze.”

            Alcoholism and drug addiction are not the exclusive domain of the poor. If you have an addiction you are much more likely to become poor. Same can be said for mental illness and psychosocial disorders.

            You mentioned smoking: Statistically the less educated you are the more likely you will smoke. One’s financial proximity to poverty means that the poorer you are, the more likely you are to smoke.

            Obesity:
            – 9.5% among College Educated
            – 30.4% among those with no high school diploma

            The overall trend right across the board regardless of education and wealth is that obesity rates are increasing. The very wealthy are showing a higher rate of obesity. Men are showing an increase regardless of education. Women are less likely to be obese if educated.
            That flies in the face of your comment that the poor are more obese.

            “For every dollar they spend at the grocery store, the poorest households save 12 cents, while the wealthy sock away $3.07 in pensions and life insurance.” (Quote from one of the links you provided)

            You ever try to consider this, if one person spends most of their money on food and shelter, they aren’t going have much left over to put into pensions or life insurance.

            Like I said at the beginning of this post, I used to believe the same things you do.
            The philosopher/novelist Umberto Eco said that we will always come up against “the hard core of Being”. One can chose to adhere firmly to their ideological paradigm and remain trapped by it or reassess it and grow.

          • 0 avatar
            Arthur Dailey

            The problem with people like MarkF and his President is that they keep expressing opinions based on their beliefs and not on statistics or facts.

            The Republican Party has been obstructionist for so long that they have forgotten how to compromise.

            The White House staff clearly are lacking in any real knowledge of how the American government actually works and therefore have ‘shot themselves in the foot’ multiple times.

            The judiciary is merely doing its job, enforcing the Constitution.

            The media are merely doing their job, pointing out lies, mistruths and misstatements. That is what a ‘free’ press is supposed to do.

            As for the ‘poor’ being lazy and unwilling to work. Some are. Some suffer from disabilities, often related to physical and/or mental health issues. Being stigmatized does not help them.

            Some are restricted from the employment process, due to lack of education and/or addictions or past criminal records. These are pre-screened in the USA in a way unheard of in other nations and have created an underclass of unemployables.

          • 0 avatar
            JimZ

            “The Republican Party has been obstructionist for so long that they have forgotten how to compromise.”

            oh they can “compromise.” But to them that word means “give me everything I want or else I’ll prevent you from doing anything ever.”

          • 0 avatar
            FreedMike

            “The Republican Party has been obstructionist for so long that they have forgotten how to compromise.”

            Were they “obstructionist,” or were they so ideologically bizarre, and thus fractured, that they just looked “obstructionist,” Arthur?

            Given the events of the last few weeks, I think we have our answer.

          • 0 avatar
            Lou_BC

            @FreedMike – agreed. We are constrained by our doctrinaire beliefs. That is our paradigm or box we pull over our heads.

  • avatar
    LS1Fan

    The higher the risk,the greater the profit (customer fees) charged. As such a greater numerical number of loans created and commensurate higher defaults are offset by the aggregate increase in profit from the loans which are in good standing. The default numbers look ugly,but we can safely assume the “profit” column is healthy- or the lenders wouldn’t be making the loans to begin with.

    Nothing to see here.

    • 0 avatar
      dal20402

      This. And because the collateral is so easily resold, even high default rates *and* falling used car prices will only result in minor losses. It’s an ugly business, but not a particularly risky one.

    • 0 avatar
      notwhoithink

      If the lenders are rolling them up into securities and selling them on, then they’re not too concerned about the default rate. It’s the same thing they did with mortgages, and it’s going to end up in the same place before we’re all done. Once the Republican-run government rolls back all of those recession era financial regulations there will be nobody to stop them.

      • 0 avatar
        LS1Fan

        Wrong answer slick.

        Even a piss poor lending firm has to track their loan default rate. That’s how the business knows they’re making the right types of loan products. If a majority of a certain auto loan portfolio is defaulting excessively, it’s time to figure out where the problem is and solve it. Forget about the securitization products- the initial lender themselves lose money on bad loans.

        As for mortgage backed securities, they were the safest investment on record at one point in time. That changed because *Customers* – not Big Bank Inc. – jumped into the asset bubble and played the game.Sure there were shady loans. But that doesn’t alter the ugly fact there were lots of shady customers too. Lots of lies on both sides of the banking desk were traded in the 00’s, and we all paid the price.

        • 0 avatar
          notwhoithink

          “Forget about the securitization products- the initial lender themselves lose money on bad loans.”

          Not if they can securitize it and flip it before the default rate gets too high. We saw them do EXACTLY this thing during the housing bubble. I’m not sure why you think this is any different.

          “As for mortgage backed securities, they were the safest investment on record at one point in time. That changed because *Customers* – not Big Bank Inc. – jumped into the asset bubble and played the game”

          Actually, it changed because there were only so many solid mortgages that the market could support. In their never-ending chase for more profits the banks had to delve lower and lower into the sub-prime market to get loans, and that’s where are all the shady business started with the loosening of underwriting standards and the acceptance of “liar loans”.

          ” Lots of lies on both sides of the banking desk were traded in the 00’s, and we all paid the price.”

          Yes, there were lot’s of one-off lies by individuals who didn’t have the financial sophistication to realize that “getting approved” and “being able to afford” a loan are not the same thing. And there were certainly lies on an institutional level from mortgage originators who were having to do anything that they could to close on more mortgages once the market for solidly underwritten loans had largely dried up. Also, lots of lies were told on an institutional level by ratings agencies and banks who were securitizing those bad mortgages and selling them on as investments, knowing full well that they were ticking timebombs.

          Now tell me, who is most responible for the situation? The individuals who should have known better but lacked the financial sophistication to understand what they were getting into, or the big banks who knew exactly what they were doing and did it anyway because they knew they could make their money and pass the ticking bomb to someone else before it blew up in their face?

          If the second group had been doing their job then the economy wouldn’t have crashed in 2008 because millions of those bad loans would never have existed. They were the professionals, and they have to be held to a higher standard than some schmuck off the street, slick.

          • 0 avatar
            FreedMike

            @notwhoithink:

            “In their never-ending chase for more profits the banks had to delve lower and lower into the sub-prime market to get loans, and that’s where are all the shady business started with the loosening of underwriting standards and the acceptance of “liar loans”.”

            Actually, these loan programs existed for a LONG time before the financial crisis began. They were called “stated income,” or “Alt-A”.

            But they were designed for people with low LTVs, high credit scores, and lots of reserves. The typical borrower for one of these stated loans was a business owner who didn’t want to have to ship in his 400 pages of tax returns. And for a guy with 780 credit, 60% LTV and six figures in reserves, those loans made perfect sense. What outfits like WaMu and Countrywide did was to expand the eligibility for these loans. So, now, instead of Dr. Fred the neurosurgeon, who I’d have no problem giving one of these loans to, you had Mr. Fred the elementary school teacher, or Ms. Fred the middle manager, doing zero-down stated loans and outright lying about their income to get them.

            How did that happen? Simple.

            1) Ratings agencies “rated” pools of these liar loans as investment grade, and sold them to the entities that serviced them. But in order for that happen, then 2) had to happen as well.

            2) The huge rise in housing prices made it less risky to do these types of loans. The run up in prices was so severe that in many markets, banks could actually *come out even* selling a foreclosed property when their lying clients defaulted. It was a zero-risk proposition to them.

            How do I know this was the key factor? Look at the timing of the mortgage crisis – it began right as housing prices began to level off and decrease, in 2007. At that point, the pools became unsaleable due to risk, which pretty much nuked the likes of WaMu and Countrywide, and then the wave of defaults hit the companies that bought the loans, leaving them holding vastly less valuable collateral for all the loans.

            In a nutshell, that’s how this all happened.

            And the group that should have stopped it all was our damn government. But they were bought off – and I’m talking about BOTH parties – to look the other way.

        • 0 avatar
          FreedMike

          @LS1:
          “As for mortgage backed securities, they were the safest investment on record at one point in time. That changed because *Customers* – not Big Bank Inc. – jumped into the asset bubble and played the game.”

          True, but the banks were the ones who let them do things like outright lie about their income to get approved. And the government let the banks actually endanger the economy by doing these loans in the first place (because elected officials in both parties were bought off to turn a blind eye).

          But all that could have been stopped pretty easily by the “ratings agencies” that reviewed these MBS packages full of liar loans. If they’d been honest, they’d have called those packages out for being utter excrement, and in no way “investment grade.” But they went along too, and investors bought these pools, only to get torched.

          Like you say, lots of hands in this mess.

          • 0 avatar
            markf

            ” And the government let the banks actually endanger the economy by doing these loans in the first place (because elected officials in both parties were bought off to turn a blind eye)”

            Wrong. Banks were forced to provide sub prime loans because of “discrimination” which they happily did because Uncle Sugar backed the loans. When the Gov is gonna back the loan why would any bank care who they give it to or if they ever got paid for it when the taxpayers were just gonna get soaked for the deadbeats…….

          • 0 avatar
            FormerFF

            @markF, no, there is no law that required banks to make subprime loans. The one law that is slightly close to that is the Community Reinvestment Act, which dates back to the 70’s. It states that any depositary bank, those ones that are federally insured, must make loans in the area where they have branches. This was to prevent “redlining”, the practice where banks took entire sections of the areas where they were located in and refused to loan in them.

            Almost three quarters of all subprime home loans were made by mortgage companies, and they are not covered by the CRA at all.

          • 0 avatar
            FreedMike

            Bulls**t, markf.

            I’ve been in the mortgage business 16 years and not one single bank was ever forced to make loans to poor folks. Not one. In fact, the type of loans you’re talking about – “community lending” products – are INCREDIBLY difficult to get approved on. Why? Because they all require full documentation, and most of the folks who apply for them are marginal borrowers. Lenders hate doing these loans because they’re far more time consuming, they’re more risky, and because we’re talking about cheap houses, they don’t generate as much revenue.

            Learn what you’re talking about sometime, OK?

      • 0 avatar
        dal20402

        “It’s the same thing they did with mortgages”

        There are two differences. First, so far it doesn’t seem like there is the same sort of outright fraud with respect to rating the securities. Second, the severity of default is lower, even if the frequency is as bad or worse.

        • 0 avatar
          markf

          It was the GOV and their obsession with homeownership……..

          “It wasn’t greed that caused the mortgage mess. In large part, the mess was the product of government policies designed to increase homehownership among the poor and ethnic minorities.”

          http://www.businessinsider.com/how-the-government-caused-the-mortgage-crisis-2009-10

          • 0 avatar
            dal20402

            This is utter tripe. Big Sh!tpile was caused by fraud on the part of both mortgage underwriters, who routinely falsified documents to approve borrowers knowing that the loans would immediately be sold and dumped into fraudulently rated securities, and the ratings agencies, who “got to yes” on whatever rating MBS issuers desired. Had either of those two parties acted honestly, we would not have had a mortgage crisis.

          • 0 avatar
            Lou_BC

            “policies designed to increase homehownership(sic) among the poor and ethnic minorities”

            Yup, it is all the poor people’s fault.

            The lower end of the middle class struggles to get by. They make just enough money to be above qualifying for any Government Aid.

            That same lower end of the Middle Class gets angry and resentful and blames the “slack azzes” on welfare since their own taxes go to support it.
            They blame the “ethnic” minorities who are willing to work for pennies on the dollar.

            One’s pride due to the need for self-sufficiency gets beat on over and over again scratching to survive day to day.

            These same low end middle class look around and realize that they are surrounded more and more by sweaty brown guys doing all of the sh!t jobs.
            They realize that the brown guys in pajamas are getting all of the high tech jobs and wonder if there will be a future for their children.

            They fear for their religious beliefs because more and more brown guys in robes are showing up.

            Along comes a guy who fights the “Establishment” and wins. He says he will keep out the sweaty brown guys taking all of the sh!t jobs. He says he will protect them from the brown guys in robes. He says he will bring back jobs. He says he will help them.

            Earlier you said, “You still don’t get it, which is why Trump will be reelected……..”

            I get it.

            The part you don’t get is this:

            “He isn’t going to fix your fears, worries, and insecurities.”

          • 0 avatar
            ajla

            “He isn’t going to fix your fears, worries, and insecurities.”

            And then what happens?

          • 0 avatar
            Lou_BC

            @ajla – “and then what happens?”

            We will see soon enough.

          • 0 avatar
            JimZ

            “And then what happens?”

            considering the past few months, I’d say little more than bread and circuses.

        • 0 avatar
          markf

          “Bulls**t, markf.” ok tough guy

          “I’ve been in the mortgage business 16 years”

          Congrats, your family must be proud

          Learn what you’re talking about sometime, OK?

          Ok!

          “Community Reinvestment Act loans and the mandates imposed on Fannie and Freddie set in motion a process in which mortgage underwriting standards became debased for everyone. When Fannie and Freddie — who, by virtue of their size and special status set the standards for the entire mortgage industry — agreed to purchase loans that required only a 3 percent down payment, no documentation of income or employment, and a far-from-perfect credit score, they affected the borrowing terms of millions of American families, not just the urban poor. ”

          https://www.pbs.org/newshour/amp/making-sense/the-housing-crisis-whats-the-feds-excuse

          • 0 avatar
            FreedMike

            What that story leaves out:

            1) The 3% down / poor credit score loans all required full income and asset documentation. None were “stated”. Approvals on these loans were rare because, as you say, most of the borrowers shouldn’t have gotten mortgages. I know – I underwrote them.

            2) Stated income loans through Fannie or Freddie generally required at least 680 credit and verification of reserves, which knocked almost all of the “community lending” applicants out of the box from square one. I know – I underwrote them.

            3) Stated income loans through outfits like Countrywide, or WaMu, or other “Alt-A” lenders required lower credit scores than the ones offered through Fannie Mae. They also offered the ability to not only lie about your income, but your assets as well. And then they made it possible for the folks who lied about their income and assets to take out incredibly risky loan types, like “pick-a-pays” or interest-only ARMs. FNMA never touched any of that stuff, and if they did, it was strictly full documentation – tax returns, paystubs, bank statements, the works. I know – I underwrote these too.

            4) Alt-A lenders like Countrywide or WaMu did not sell their own Alt-A products through Fannie Mae. They had their own securitization channel that had nothing to do with FNMA, FHLMC, VA or FHA. That securitization channel was all done through Wall Street outfits…like Lehman.

            No one disputes CRA specific loans were part of the problem. But they were a pretty narrow slice of the stuff what went wrong. Most of what went wrong was interest-only, adjustable rate, stated income loans made to nice, middle class folks with decent credit. They speculated, or they used the stated-income, interest only loans to buy houses they couldn’t afford.

            I know – I underwrote God only knows how many of them. It would take hours for me to tell you all the horror stories of people who were outright lying, but I’ll offer two: 1) an old guy who claimed to be making $4,000 a month from Social Security retirement (with the income caps, that’s literally impossible), and 2) a guy who was 20 years old and claimed to have operated a limo business for five years. Both of these borrowers eventually got approved. I saw THOUSANDS of variations on this kind of garbage.

            I never saw many CRA loans. Those I did see were for folks with low incomes and nasty credit, and very few got approved. But there were no shortage of mortgage brokers who took these unqualified folks and put them in mortgages. And where did they get them bought? It wasn’t any government loan program…it was at places like WaMu, which sold its’ loans through an entirely separate channel than the one in the story you posted.

            This all explains why the GSEs (Fannie, Freddie, FHA, VA) lost market share in the housing boom. Their loans were all FAR harder to approve.

            Like I said…learn a bit before you comment.

    • 0 avatar

      I’m honestly curious now if the high used car prices (low end of the market) are being caused by the increase in lending to poor credit people? Basically increasing the pool of buyers and the funds available has increased the prices. The 3-7 year old cars seem normal but the low end 7-12 year old cars seem to be 30-40% more expensive then the were 10-12 years ago which would seem to be outstripping inflation by a good 20% or more. There are some exceptions to this compact cars seem cheaper for instance (gas prices?) but everything else seems pricey. Of course a family friend recently bought a 2006 Grand Cherokee with 150k miles on it from a BHPH for 8k and somewhere around 12% interest rate, no one would make that loan back in the olden days.

      • 0 avatar
        dal20402

        Definitely. Easier credit raises prices, all else equal.

      • 0 avatar
        markf

        “policies designed to increase homeownership(sic) among the poor and ethnic minorities”

        “Yup, it is all the poor people’s fault”

        Who is blaming the poor? It is the GOV trying to force home ownership on poor folks thinking that owning a home will magically raise them to the middle class. The Gov looked at things that the middle class had like owning a home and figured if only the poor owned homes they would be magically middle class.

        Brown guys in robes and ethnic minorities, LOL you really don’t get it. And I might add you are quite the racists.

        I am sure you will be spewing the same nonsense in 4 years when Trump is sworn in again……

        • 0 avatar
          Drzhivago138

          It has been documented that home ownership is /one/ way to build wealth.

          • 0 avatar
            markf

            “It has been documented that home ownership is /one/ way to build wealth.”

            Yes, when done in conjunction with other wealth building habits. Encouraging people who can not afford to buy houses to buy houses and expecting them to”build wealth” is insanity but this has been Federal Government’s line since Clinton……

          • 0 avatar
            OldManPants

            Markie-Mark, consider this: it’s unarguable that poor people will increasingly be shooting each other as we become ever more a uniquely gun-saturated 3rd world society.

            Isn’t it better to have them doing that within the confines of their perhaps ill-gotten homes rather than somewhere out in public where we may chance to be?

          • 0 avatar
            Lou_BC

            @OldManPants – you must have missed the memo. It is one’s inalienable right to a gun but not to shelter.

          • 0 avatar
            OldManPants

            Well, Lou, Markie will just have to learn to stop spazzing and to always look on the bright side of life.

          • 0 avatar
            28-Cars-Later

            Judean People’s Front? We’re the People’s Front of Judea!

          • 0 avatar
            OldManPants

            Wankers.

          • 0 avatar
            Lou_BC

            28-Cars-Later – “Judean People’s Front? We’re the People’s Front of Judea!”

            Ha Ha.

            I saw the “Life of Brian” linkage too.

            Kudos.

            I’m not Worthy.

            Try to work in an AMC Pacer comment on that one ;)

    • 0 avatar
      bikegoesbaa

      After 2008 I’m skeptical of the ability of lenders to accurately assess the risk of the loans they are making; especially when they’re focused on “healthy profits”.

      • 0 avatar
        markf

        “It is one’s inalienable right to a gun but not to shelter” Although full of snark your statement is 100% true. 2nd Amendment baby. “shelter” is not the Gov’s job nor is it in the Constitution. Maybe you Trudeupians can take all our poor and illegals since you seem to have all the answers…..

        “it’s unarguable that poor people will increasingly be shooting each other as we become ever more a uniquely gun-saturated 3rd world society.”

        No, it’s very “arguable” cause your statement is complete nonsense. If poor people are so poor how can they afford guns? I thought they couldn’t afford cars or healthy food? Seen the price of ammo lately? Where is this money coming from? And why are they not spending it on reliable cars and healthy food?

        • 0 avatar
          Lou_BC

          Ironic, you don’t have a problem standing by your constitution when it comes to guns but you have an issue when it comes to religion.
          Your constitution does have property rights protected. Shelter is property.

          “Maybe you Trudeupians can take all our poor and illegals since you seem to have all the answers…..”

          I don’t have all of the answers but I am willing to discuss it.

          What are “Trudeupians?

          Alex, I’ll take misspelled attempts at insult for 1,000 please!

          I don’t believe that we have accepted any of your illegals but we have taken in a large number of your refugees. Maybe you can build a wall in Northern Minnesota.
          On the subject of walls:
          You can put those poor and illegals to work building that wall. 67 billion will pull a lot of people out of poverty.
          That is assuming putinspotus can get enough people in congress to agree.

          • 0 avatar
            markf

            Nothing like getting lectured on the US Constitution by a Canadian. “I’ll take what are Constitutional non-sequitur for $1000 Alex”

            “Ironic, you don’t have a problem standing by your constitution when it comes to guns but you have an issue when it comes to religion.”

            “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof”…. What part of that says Somalis or Yemenis have a RIGHT to enter the US unfettered? What part of that says ANYONE has a right to enter the US? AGain, please show me your outrage from 2013 when saint obama did the same…..

            “Your constitution does have property rights protected. Shelter is property.” WTF are you even talking about. The US Constitution talks about Private Property rights, the “shelter” you are running on about is to be provided by the Government.

            Since you are a Constitutional scholar please show me where Shelter, healthcare, food and all the other Liberals dreams are enshrined in the Constitution. Show me in the Federalist Papers where the Founders wrote about all these alleged “rights”

            “I don’t believe that we have accepted any of your illegals but we have taken in a large number of your refugees.”

            They are not refugees, they are economic migrants and they are not “ours” and you ave taken 200 or so?

            “Putinspotus” LOL, the number one sign of Trump Derangement syndrome………

          • 0 avatar
            JimZ

            “Nothing like getting lectured on the US Constitution by a Canadian.”

            when all else fails, fall back on argumentum ad hominem.

          • 0 avatar
            markf

            “when all else fails, fall back on argumentum ad hominem.”

            I’s not ad hominem if the fool does not have a clue of what he speaks about and I backed up my argument.

            Please continue to try to hijack the comments, its very entertaining…..

          • 0 avatar
            JimZ

            “I’s not ad hominem if the fool does not have a clue of what he speaks about and I backed up my argument.”

            you don’t back up s**t. You just repeatedly spout your “truthy” nonsense.

            you claimed he doesn’t know anything about the US Constitution simply because he’s Canadian. that’s an ad hominem argument.

          • 0 avatar
            FreedMike

            “Since you are a Constitutional scholar please show me where Shelter, healthcare, food and all the other Liberals dreams are enshrined in the Constitution. ”

            Show me where the right to tell men who wear dresses that they can’t use the ladies’ room, or tell women they are stuck carrying babies to term, and other conservative dreams, are enshrined in the Constitution.

            And, hey, since this is a car site, tell me what article of the Constitution enshrines the right to drive an automobile.

            Oh, and by the way…I don’t see to see anything about the ability to regulate immigration, or the right of the president to selectively tell people from certain countries to stay home, in the Constitution at all.

            I can’t seem to find any of that in there. But I’ll defer to you, O Constitutional Scholar. Just tell me where they are.

          • 0 avatar
            markf

            ” you claimed he doesn’t know anything about the US Constitution simply because he’s Canadian. that’s an ad hominem argument.”

            he doesn’t know anything about the Constitution because his silly arguments show he doesn’t have a clue what the Constitution says; see asinine remarks that since it mentions private property it must really mean shelter full all!

            Carry on hijacking!

          • 0 avatar
            Lou_BC

            @Markf – I made that comment AFTER reading some court decisions upon what constitutes property. There have been cases where “homeless” people have been forced to move from public property where they had taken shelter in tents/tarps/plastic and sleeping bags. It was found to be unconstitutional to seize their shelter because it is personal property. You can make them move but not take away their property.

            I’m all for open dialogue. If you feel I’m incorrect and need “educating” than please provide the information.

            Your response is highly typical of one trapped in a cycle of cognitive dissonance. There isn’t a sound rationalization for your position on “the poor” or on discrimination based upon religion so you deflect, avoid or attack.

          • 0 avatar
            FreedMike

            Still waiting, mark…prove you’re smarter than the Canadian guy when it comes to the Constitution. Or are we in for more deflection?

            My money’s on more deflection. Anyone in with me?

      • 0 avatar
        dal20402

        Lenders are *extremely* good at assessing risk. They just chose not to bother in 2005-2007 because they knew the loans could be promptly repackaged into securities that would be rated AAA without much if any due diligence by the ratings agency.

        • 0 avatar
          FreedMike

          That was part of it, dal, but not the whole story.

          The run up in housing prices reduced the risk of making subprime loans, thus making the ratings agencies more apt to call junk loans “AAA”. Why? Because if a $500,000 house that a bank loaned $300,000 on was going to be worth $750,000 in a few years – and we did see “appreciation” of that kind during 2004-07 in a lot of markets – then the servicer was insulated from loss, and was still making higher interest on the loan. In other words, the risk was “justified.”

          Notice that the whole thing began to collapse the minute that housing prices leveled off and began to dip, which started around 2007 in most of the over-heated markets.

          All the sudden, no one would buy the risky loans anymore. It was at that point that lenders began to go t*ts-up in very short order. The lack of equity in the collateral left them *horrifically* exposed.

          During the 2004-07 period I was working for a homebuilder. We had communities in Las Vegas where brokers would just pack scores of prospective buyers on a tour bus, and have them pick out houses to buy using “no income/no asset” loans, which were very much a thing. As long as you had a 740 score and could run your credit cards or home equity line up enough for the down payment, these loans were eminently approvable.

          At the beginning of the day, the price was “X”. At the end of the day, it was “X + $7500”. And they did that for months.

          And, hey, markf…you’ll like this observation. None of these folks were inner city community lending buyers. They were all nice, middle class folks with good credit.

          • 0 avatar
            Arthur Dailey

            And since Mark likes to complain about the judiciary, why not complain about the Heller decision which went against over a century of jurisprudence?

        • 0 avatar
          markf

          “And, hey, since this is a car site, tell me what article of the Constitution enshrines the right to drive an automobile.’

          When did I or anyone else say driving is a “right” What are you going on about?

          “Oh, and by the way…I don’t see to see anything about the ability to regulate immigration, or the right of the president to selectively tell people from certain countries to stay home, in the Constitution at all.”

          Are you referring to saint obamas 2013 muslim ban?

          “Show me where the right to tell men who wear dresses that they can’t use the ladies’ room, or tell women they are stuck carrying babies to term, and other conservative dreams, are enshrined in the Constitution. ”

          Who knew conservatives dreamed of telling men in dresses to use the men’s room? Thanks for the reminder.

          “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

          • 0 avatar
            markf

            “And since Mark likes to complain about the judiciary, why not complain about the Heller decision which went against over a century of jurisprudence?”

            For the same reason you are not complaining about Brown vs Board of Education overturning Plessy v. Ferguson.

            In both cases, clearly unconstitutional laws were overturned.

          • 0 avatar
            FreedMike

            More deflection and “blame Obama.”

            Thanks for playing, markf.

          • 0 avatar
            FreedMike

            “In both cases, clearly unconstitutional laws were overturned.”

            No, because neither handguns nor schools were mentioned in the Constitution. I’m sure one of our Canadian friends you like to mock knows that far better than you do, but I digress.

            Both decisions were based on *interpretations* of what’s constitutional and unconstitutional, versus “strict constructionists.”

            Damn judicial activists, right?

            On a side note, a) how much per post are you getting from Russia, and b) is there a domestic company paying you, or do you have to file a 2555? Oh well. Whatever it is, it’s way too much. I’ve seen better trolling from a middle schooler.

          • 0 avatar
            Lou_BC

            “In both cases, clearly unconstitutional laws were overturned.’

            And in both cases, Muslim bans were viewed by judges as being unconstitutional.

            I’d refer you to articles explaining the differences between “Saint Obama’s” restrictions and “King Puzzy Grabber’s” ban but I doubt you’d take the time to read it.

            Now, on to your complaint about others “hijacking” the thread:

            Why the offence?

            This is an open forum where one is *free* to express their views.

            In virtually every democratic country, one has the right to free speech.

            Please feel free to explain why I’m wrong.

        • 0 avatar
          markf

          “Still waiting, mark…prove you’re smarter than the Canadian guy when it comes to the Constitution. Or are we in for more deflection?

          My money’s on more deflection. Anyone in with me?”

          Already done, you need to learn to read.

          Still waiting for you and the other geniuses here to explain where healthcare, bathrooms,and housing are covered.

          Also waiting to hear how the Constitution guarantees every person on earth the right to immigrate here. Oh, and I want to see your outrage on obama 2013 “muslim” ban

          My bet is more snark, arrogance and deflection

          • 0 avatar
            Lou_BC

            @FreedMike – there is your answer.

            Ideology means that logic becomes the rider on an irate 1,500 lb elephant.

            As much as one tries to make it appear that logic is in control, the beast bellow still does what ever it wants.

          • 0 avatar
            markf

            “No, because neither handguns nor schools were mentioned in the Constitution.”

            So that is game you want to play. Ok smart guy show me where the words abortion, privacy and gay marriage are in the constitution.

            Handguns are clearly covered by the word “Arms”,just a writing and article on a blog is covered by the 1st Amendment and freedom of the press.

            Show me where education, healthcare, welfare, transportation are covered.

          • 0 avatar
            markf

            “@FreedMike – there is your answer.

            Ideology means that logic becomes the rider on an irate 1,500 lb elephant.

            As much as one tries to make it appear that logic is in control, the beast bellow still does what ever it wants.”

            Let me know when you two are done sucking each other off……..

          • 0 avatar
            Lou_BC

            @markF –
            “Let me know when you two are done sucking each other off……..”

            You need to be told that?

            That’s what happens when the right defunds Sex Ed.

            MAGA

            “Make Anal Greek Again”!

  • avatar
    deanst

    Lending is a cyclical business – overtime you extend credit to weaker and weaker borrowers, only stopping when something breaks. The rationalizations given in the article are trivial – it’s just the credit cycle at work.

    What will make a difference this time is that the loans have a longer maturity profile, which means the borrower stays under water for a longer time, and the lender has less benefit from any residual value of the car. The other major factor will be falling new car prices, which will obviously hurt residual values in the used car market.

    For point of reference, Ford had a loss severity of over $10,000 last year -ie a loss of $10,000 on every loan where they ended up repossessing the car.

    • 0 avatar
      highdesertcat

      I agree, and that’s why I am puzzled why getting an auto loan is more stringent for old people with a guaranteed income, who want to finance.

      Please! Don’t anyone tell me it isn’t so because I just discussed this topic yesterday over lunch @PizzaHut with a couple in their seventies who were required to disclose all their financial assets, life insurances, etc, on the application.

      Seems to me that people without assets or financial stability are more easily approved for these Deep Subprime loans, and the lender stands a greater chance of a default, than they would with old people.

      I call that age-bias! It’s alive and well. Maybe even in YOUR area.

      • 0 avatar
        FreedMike

        Well…as someone who actually is in the business of approving loans, I have this observation:

        Most elderly borrowers have good credit, but they also have comparatively low incomes (fixed retirement income, etc), and thus have a high debt-to-income ratio. High DTI presents obvious risk (inability to make loan payments). Often times you need a borrower’s assets for a complete picture of risk, and some lenders use their assets in a calculation to provide additional income. I don’t know if auto loan providers do that kind of income calc, but mortgage lenders do. In any case, I’d look at a borrower with high debt ratios far more favorably if they had a strong asset base as well.

        If the bank that was looking at their vehicle loan saw enough income and good enough credit, they’d have had no reason to do any additional due diligence. My guess is that these folks had a high DTI and they were looking for a way to get their loan done. Not unreasonable at all, if you ask me.

        • 0 avatar
          highdesertcat

          “as someone who actually is in the business of approving loans”

          Heh, heh, heh……

          I know.

          I remember.

          You saw through my effort not to be confrontational.

          BTW, I advised my friends at lunch yesterday to bite bullet, pay cash for their new car, and replenish their life-savings with their monthly socsec checks, while living off his Army-retirement income ($1550/month).

          It will leave them with only $20-grand in saving, and that’s what they feared would not be enough to cover their end-of-life expenses should they check out unexpectedly.

          They didn’t want their kids to be saddled with the costs of burying the parents.

          • 0 avatar
            FreedMike

            That’s what I figured, HDC…retiree on fixed income. I see them all the time. That’s why we ask about their assets – it mitigates the risk.

            Did they get approved? If so, was the rate?

            Personally, I’d advise them to do a zero-out-of-pocket lease on an inexpensive car and keep their cash, versus spending their nut on a depreciating asset like a car.

            One thought: if the military benefit is for VA disability versus pension, the lender might be able to “grossing it up” as non taxable income.

          • 0 avatar
            highdesertcat

            FreedMike, yeah, you and I do think along the same lines. We considered all your thoughts. (over a large deep dish Supreme)

            They haven’t bought yet but said my suggestion of paying cash from their savings was the way they chose to go.

            I gotta go to lunch. Carino’s today!

            Later.

        • 0 avatar
          Lou_BC

          @FreedMike – That makes sense and another aspect is the questions as to whether or not the elderly people getting the loan will live long enough to pay it off. A 7-8 year amortization is literally a lifetime for someone in their late 60’s early 70’s.

          • 0 avatar
            FreedMike

            @Lou:

            In the U.S., it’s illegal to use a borrower’s age as a factor in risk assessment, as long as he is of legal age to enter into a contract. That’s what we call a “prohibited basis” for denying a loan. We are not legally allowed to assume someone’s going to die before the loan matures.

            Other prohibited bases: religion, race, marital status, number of dependents or children, woman of childbearing age (i.e., ‘she’s gonna get pregnant and then not be able to work, and she won’t pay the mortgage,’ etc).

            But if banks are able to use a borrower’s asset base as a compensating factor, then older folks are at an advantage – many have decent savings that younger borrowers don’t. Some banks actually do a calculation on your retirement assets and use them as income if you’re of retirement age (the one I work for does). I suppose that’s age-ism…

          • 0 avatar
            Lou_BC

            FreedMike – true. I did forget briefly that one cannot discriminate based upon age. Thanks for the reminder.

      • 0 avatar
        LS1Fan

        I call it calculated risk.

        A subprime borrower with consistent monthly income buying a new car is a smaller risk then an old person on a fixed income financing a used car.

        Strange? Not from the lenders perspective. If the subprime borrower defaults,the risk is offset by both higher interest rates charged in the loan product and the recovery of sellable collateral. The older person buying a used car can still default,and if they do the used car will be nigh worthless in that event. So the interest and/or fees have to be raised to compensate for that business risk.

        • 0 avatar
          FreedMike

          Depends on your definition of “risk.”

          Risk of default would be higher with the guy with the lousy credit score than it would be with an old guy with 800 credit, high ratios and a lot of money in the bank. In the end, the latter guy’s gonna pay his bill (if nothing else, you don’t get 800 credit by flipping the bird at lenders). The former? Not so much.

          The higher fees and interest rates might mitigate that risk, but it’s still higher risk no matter how you slice it.

          It also has to do with the potential value of the collateral. If that value remains stable, then risk is mitigated. If if that value drops…well, the last time that happened was during the financial crisis. All the sudden, banks that made high-interest, high-fee loans were exposed BADLY when it became apparent that the houses they would be recovering were worth far less. This began during 2007, and was the first hint of the meltdown to come.

          If automobiles become less valuable as collateral, look for the market to tighten up considerably.

          • 0 avatar
            Lou_BC

            “If automobiles become less valuable as collateral, look for the market to tighten up considerably.”

            That is why deep sub-prime loans on auto’s are risky. They are a rapidly depreciating asset.

            Misuse or abuse depreciates that asset even further. There is a local “repo” lot I drive by rather frequently. The vehicles sitting there for resale tend to be rather beat up.

          • 0 avatar
            FreedMike

            Exactly, but if the depreciation curve for cars in general becomes steeper, that a) reduces the potential default recovery for the lender, thus b) increasing risk.

            Same calculus applies in my industry (mortgages). Dropping home prices were a major factor in the financial meltdown – banks made risky loans on the premise that if they had to resell the house the borrower defaulted, they’d get a certain percentage of their loss back. Some even made ultra-risky loans on the assumption that the home would be worth far more than it was when they made the loan, and they’d be able to resell it at a profit (tell me what could have *possibly* gone wrong with that assumption…LOL).

            When that percentage decreased, their financial exposure to losses in their portfolios went up.

  • avatar
    Astigmatism

    But how else is Nissan supposed to find its customers?

  • avatar
    djoelt1

    I’m always amazed at what people spend on cars. Shocked, really. We are cracking the 1% and we have a 10 year Ford that we bought for $15K and a 4 year old Prius that we bought for $18K. Prius is a keeper and we may replace the Ford with the Transit Connect in a few years.

    A relative in the .1 or .05% drives a Subaru Forester and an Audi A3.

    Why are people spending so much on a depreciating item?

    • 0 avatar
      FreedMike

      Many reasons, some irrational, but one that’s quite rational: for most Americans, if you don’t have a car, you can’t have an income. This calculus is especially acute for folks with no money.

    • 0 avatar
      brenschluss

      I agree, why would anyone spend money on something that they enjoy? Wasteful sybarites.

      This is why I eat only hardtack and gruel, because it all just becomes s#it in the end anyway.

      • 0 avatar
        bikegoesbaa

        If you can *actually afford* an expensive car then have at it.

        But I don’t have much sympathy for the folks who cry because their luxury car or full-zoot SUV got repossessed.

        Or the people who complain about not having enough money but somehow manage a brand-new vehicle every 2-3 years.

    • 0 avatar
      dal20402

      I think djoelt1 wins Peak TTAC Commenter. Even though this is a website for car enthusiasts, there’s something about it that attracts a lot of people who think cars are fundamentally a waste of money.

      But most people don’t work hard to make money just so they can hoard all of it and die with millions in the bank. Some people have long car commutes and want more comfort. Some people want the image that comes with driving a luxury car. Some people just enjoy cars in general and are willing to use some money on them.

      Yes, I could have a few more bucks in the bank if I had bought a used rental-spec W-Impala instead of my Lexus. But then I’d have to drive a used W-Impala.

      • 0 avatar
        OldManPants

        “I think djoelt1 wins Peak TTAC Commenter.”

        I like him!

        Motorized chairs are very important in our society and they should be affordable, safe and efficient. But all that’s gloriously available, new, for <30K.

        • 0 avatar
          JuniperBug

          There’s a lot of middle ground between “work hard to make money just so they can hoard all of it and die with millions in the bank,” and what the average North American consumer does.

          If you have the money to have your needs/responsibilities met and have cash(flow) left over, by all means buy whatever you want. I – and I think others – only take issue with the concept of buying twice the car you need while struggling to pay your bills every month and the prospect of spending their retirement years eating cat food looms.

          People can spend their money/credit however they want as long as my money won’t be used to bail them out (I know it will), but I can’t comprehend sacrificing financial stability in order to brag about a faster 0 to 60, leather seats, a more trick suspension, or a fancier badge on the grille.

          Marketing is BS – your car doesn’t signal your station in life, and clothes don’t make the man. The man makes the man.

          Besides, the most fun I’ve had with vehicles was in a 10+ year-old Jetta and a 16+ year-old Ninja 600, despite owning nicer ones since then.

        • 0 avatar
          mcs

          “Peak TTAC Commenter.”

          I wonder if there is anyone out there driving a buckboard and a mule reading the site on an asr-33?

      • 0 avatar
        krhodes1

        Well said, dal. In my case, I have no kids, don’t drink or smoke, don’t even have an expensive coffee habit, don’t golf or have a boat, spend about nothing on clothes, own two crazy cheap houses, and work my butt off for a decent salary. I can afford to “waste” a metric crapload of money on cars and I GREATLY enjoy doing it.

        The number of hair-shirters on here gets a little extreme sometimes.

        Plus I think “depreciation” is a stupid way to look at cars anyway. The better accounting concept to use is “depletion”. In exchange for the reduction in value of a car, you get valuable transportation.

    • 0 avatar
      Lou_BC

      Vehicle buying like most decisions we make are emotion based not logic based.

      I’m betting that there are “emotional” reasons why you feel amazed and shocked. Those descriptors alone show emotion.

    • 0 avatar
      deanst

      I totally agree on the craziness of people’s auto purchases. I’m in the 1% but living in Toronto supporting 2 kids in university does not make me feel rich. When gas prices where higher and I was seeing people fill up their pickups for $150, I was totally dumbfounded. Is spending $150 on gas really what makes you happy? I’m a car fanatic, but am happiest when I have an average car with no debt, content in knowing that I could buy something more exciting at any time. I currently have a GM bought at half price in their going out of business sale, and a Mazda bought at a 30% discount. All my friends have German cars, and they seem to spend more time complaining about the troubles – big and small – rather than talking about any enjoyment they get out of their cars.

    • 0 avatar
      ajla

      What else am I going to do with my excess cash?

  • avatar
    yankinwaoz

    I highly doubt the Cash-4-Clunkers wiped out the bottom of the market. I think what really did it was the collapse of the lease market in 2009ish. So perhaps it was a combination of the bottom being wiped away AND nothing replenishing it in volume.

    Leases feed a nice supply of used cars in to the used car market. When credit froze in 2009, you couldn’t get a lease, and it often turned out to be cheaper to to just buy the car. Or just keep the one in your drive way another year.

    Only recently have I noticed leases are back. So in a few years, these leased cars will end up feeding the used car market with inventory. That, combined with a lack of interest in even owning a car, will drive the prices down on older cars.

  • avatar
    pdieten

    “The $3 billion cash-for-clunkers program from 2009 obliterated the cheaper end of the used vehicle market to the detriment of America’s lowest income earners as used vehicles they could have afforded were largely removed from the market. This forced those buyers to scrounge enough money together to buy something more expensive or risk going deeper into debt by taking out a loan they might never be able to afford.”

    How do you expect anybody to take you seriously as a writer, or as a person, when you include this obvious nonsense? Unless you are trolling, in which case well done.

    Exactly who do you think is in the used car market looking for the mid-’90s Explorers that were wiped out in C4C – which would all be in the junkyard by now anyway because they’re too expensive to keep on the road?

    If you’re wondering why you can’t buy a running car for $500 anymore, that’s because it’s not 1968 anymore, and a mechanic needs $80/hr or more plus parts to keep a car on the road. Old cars get totaled out for the four-figure repair bills that often arrive once they reach their 20th year. And if people are taking out unaffordable loans for new cars, that means they are status-seeking fools who wouldn’t buy a decent used car at any price anyway, so why are you even worried about them?

    • 0 avatar
      28-Cars-Later

      The overall point on C4C raising uses car prices was somewhat debunked with data a while back. Essentially, the drop off of production from 2007 (about 16 m units USDM) to a shade over 9m units created a shortage which wasn’t felt until about 2010. The author makes assertions without evidence which I am inclined to agree are not necessarily accurate. C4C was a stupid idea from a stupid administration but it alone did not push FICO 550s into new car dealerships to lease (if at all). Those FICO 550s clung to whatever they could find. If you tried to buy a used car from about 2010-12 you would remember how difficult it was at the time. The last time I was physically on the block was August 2010, and it was a madhouse at the time.

      “Exactly who do you think is in the used car market looking for the mid-’90s Explorers that were wiped out in C4C”

      Poor people with children, at the time those were only about fifteen years old and could be made to run in some cases (esp gen 1 Expy).

      “If you’re wondering why you can’t buy a running car for $500 anymore, that’s because it’s not 1968 anymore”

      I traded a Thinkpad for an MY85 Cadillac Coupe de Ville (4100, 99k) in 2004. I have seen running vehicles trade for under $500 as recently as 2009. I get your overall point, and I agree, but your first statement sounds a tad foolish.

  • avatar
    mmreeses

    hyperbolic troll comment that i feel compelled to make—-never going to click on a TTAC financial article again.

    :)

    Don’t disagree w/the premise—-but the article is a wreck.

    We’ll find the financial stuff at Bloomberg on our own.

  • avatar
    watchdoc

    The auto market is nothing like the home market. The car market is very efficient at cycling through bad debt. Past due accounts get repo’d and sold at auction in just a few months. There is no federal bailout or harp money to stop the repo man. Yes, there is clearly a bubble when people take out 84 month loans on cars that likely won’t last 60 months because the same stupid people that take out these loans don’t bother to take care of them. That being said, the auto market moves so fast, the bubble is gonna burst and the market will adjust before we can write about it,

  • avatar

    Lotsa “millionaires next door” types here. Well, we are all perfect drivers on the internet.

    Want to see sad ? Go to a chain auto parts store in a bad neighborhood, and look at the cars in the lot, then go inside and listen to the stories. B&B, not.

    I’ve always had less car than “I could sign for”, because cars are a cash sink. The trick is the right car for your needs at the best price-or admission you are paying to be entertained, which is cool too.

    There are always people who will make a bad deal. The law doesn’t protect stupid, and if a bank will lend, there is always someone who will take, no matter how bad the deal.

  • avatar
    PandaBear

    It’s the interest rate, plain and simple.

    When interest rate is 0, someone will be buying high risk ABS because taking a chance on the higher risk for a higher return will still make more money than taking no risk and get less return.

    Plus today we have GPS kill switch, that reduces risk quite a bit.

    Plus today’s cars are made better and last longer. So they can offer a longer term.

    Plus used car prices are still ridiculously high, so the repos would still worth more.

    Plus trump would raise tariff and destroyed the parts supply chain of today’s auto manufacturing business, that’ll reduces the supply and increase future production cost, reducing production level. That makes car more expensive and used cars worth more.

    Calm down guys, things will be alright.

  • avatar
    JD-Shifty

    wow. highdesertcat and markf are gullible right wing idiots.


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