Infographic Shows How Auto Loan Securitization Works

Derek Kreindler
by Derek Kreindler

Even though I’ve taken a crack at it in numerous articles, this infographic from GM Financial contains a much more thorough explanation of how auto loans are securitized. Click here for the full-size version.

Derek Kreindler
Derek Kreindler

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  • Mitchw Mitchw on Aug 07, 2014

    How long before this thread becomes a political melee?

  • John Rosevear John Rosevear on Aug 07, 2014

    That is a superb graphic. Props to GM Financial for making that available.

  • Fred Fred on Aug 07, 2014

    My broker sent me an article today about buying bank-loan funds. Aparently they are paying pretty good, but of course there are risks.

    • Ect Ect on Aug 07, 2014

      I thought so, too. They do leave out 2 things; 1. There is typically limited (in time) recourse back to them on bad loans, 2. In addition to the interest rate differential (which is mostly paid up front), they get paid around 2% to service the loans. The other feature of this type of program is that it works best for longer-term loans. For 3-4 year loans, the time required to season the package, then get it rated and marketed probably doesn't justify doing it for the short term remaining. Works wonderfully for 6-8 year loans, though. Those loans carry a lot of extra interest cost.

  • APaGttH APaGttH on Aug 07, 2014

    We gnomes know a lot about business. Step one, we collect all the world's sub-prime auto loans. Step two... Step three, profit. Get it?