By on April 21, 2020

As the resulting complications of coronavirus lockdowns obliterate the economy, reports have emerged that subprime car buyers are beginning to skip payments. Delinquencies were expected to come up a bit this year, even before local governments started issuing lockdown orders, but the swift economic impact of these health initiatives have proven wider-reaching than anyone anticipated.

Normally, the status of the more volatile subprime market is a useful tool in assessing the financial well-being of the country as a whole — sort of an early warning device for economists. However, getting an accurate read on who stopped paying could be hard during the pandemic. Many lenders are offering deferral programs to keep one or two delinquent payments from turning into full-blown defaults. Still, the initial signs are about what you’d expect, and it plants another economic red flag into American soil. 

Credit Acceptance, a U.S. auto lender focused on customers subprime credit scores, issued a warning on Tuesday. Referencing a recent filing with the Securities and Exchange Commission (SEC), the company said, “the current outbreak of COVID-19 has adversely impacted our business, and the continuance of this pandemic and any future outbreak of any other highly contagious diseases or other public-health emergency could materially and adversely affect our business, financial condition, liquidity and results of operations.”

It then suggested many other subprime auto finance providers should buckle up, because it doesn’t anticipate this being an isolated incident. It’s also postponing its first-quarter financial statement until the end of June while also pushing back a planned shareholders meeting. However, while Credit Acceptance felt comfortable in delaying what’s likely to be a rather unpleasant financial report, it did manage to get out a warning that subprime buyers are getting behind on their payments in its regulatory filing with the SEC.

Bloomberg shared a portion of that document on Tuesday, noting that the lender had witnessed a “sharp drop-off in payments” as people impacted by COVID-19 prioritize other things:

As unemployment soars, borrowers are putting off payments or “reallocating resources,” Credit Acceptance said in a regulatory filing Monday, explaining that it needs more time to publish a quarterly report. New lending is also slowing as dealerships across the U.S. are forced to shutter their showrooms, the company said.

“A continued disruption in our workforce, decrease in collections from our consumers or decline in consumer loan assignments could cause a material adverse effect on our financial position, liquidity and results of operations,” Credit Acceptance wrote.

The firm is among the first to report an uptick in delinquencies as some lenders offer forbearance, hoping that what consumers need is time to get through the pandemic so they can resume payments. Ally Financial Inc. said on Monday that about 25 percent of its auto-loan customers have taken advantage of its payment-deferral program.

That’s substantial, but questions remain. While unemployment has taken off like a rocket, it’s unknown how many of those lost positions will re-emerge on the other side of the pandemic. Likewise, loan forgiveness programs are supposed to help customers weather the inclement economic situation so they can return to making payments later. That, in addition to how long the public puts up with various states’ lockdown orders and how nasty the pandemic ultimately becomes, will probably be the deciding factor in how this plays out. This is also preliminary data, though we have an inkling subsequent reports will be similar over the next few months.

[Image: pathdoc/Shutterstock]

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88 Comments on “Report: Subprime Buyers Not Paying Auto Loans...”


  • avatar
    thegamper

    Wait….what? No way.

  • avatar
    thelaine

    Literally NO ONE predicted this.

    • 0 avatar
      Old_WRX

      Oh, golly gee whillickers, how could anyone have foreseen this?! I mean, come on, politicos don’t know nuffin ’bout economics.

      These loans, mortgages, and small business loans will be defaulted on. Banks don’t hold a lot of cash: they will fail; FDIC will go bankrupt; your money in the bank will go bye-bye. The economic domino effect will be devastating. Then of course nameless companies will buy up the defaulted loans for next to nothing and start sending [name redacted to avoid offending anyone on the endless do-not-offend list] around to collect. Foreclosures and repos will abound.

      But, really, this couldn’t have been foreseen…

      • 0 avatar
        JimZ

        hmm, so it’s “overreacting” to think the virus could be really bad if we don’t do something about it, but it’s not overreacting for you two to claim civilization will be over if business has to pause for a month and a half.

        besides, seems to me if this is dooming us all to poverty, it was a house of cards about to fall anyway.

        • 0 avatar
          Old_WRX

          I didn’t say anything about how bad the virus is or isn’t. The info in the media is so all-over-the-map that it is very hard to draw any real conclusions from it.

          My understanding (limited though it is) is that the economy was in a precarious position before all this. I find this stuff about how we’ll just shut down for a while and then go back in and flip the switch to turn everything back on very naive. The economy, particularly with our modern JIT/Lean mindset, is a very tightly interlocking system, and we are not talking a minor hiccup if this thing goes on for several months.

          • 0 avatar
            HotPotato

            Yep. Some things should NOT be subject to just-in-time supply, and at the top of that list is medical personal protective equipment. Hospital administrators and the state and federal governments should have been stockpiling like Mormons in the soup aisle, not saying “I could save literally thousands in rent by ditching this warehouse.”

        • 0 avatar
          thelaine

          First there is the entire restaurant business. So far more than eight million people have lost their jobs, and it is expected that at least 1 in 5 restaurants will close down.

          Then we have the housing market. In March home sales plunged 8.5%, is expected to get worse, and appears to be hitting the entry-level market the most. On top of this the home-building market has crashed, with new housing starts plunging 22% in the past month, the worse such drop in almost forty years.

          Meanwhile, the rental market is crashing, with wholesale evictions expected because the now-unemployed renters are unable to pay their rents.

          Next we have the energy industry. Not only has the demand for oil plummeted, sending the energy markets into a tailspin, the entire clean energy industry is losing a half million jobs, with more job losses in March then were created in all of 2019.

          What about the airlines? The government restrictions on travel as well as the demand for social distancing has essentially destroyed this entire industry. No one is flying, with a 96% decline in passengers this year. Nor will any of this change until people are reassured that they won’t die if they get on an airplane.

          Then we have the healthcare industry itself. Many of the government lock downs have included edicts that prevent hospitals and doctors from doing what the government considers non-essential procedures. No one asked any doctors it appears, because these edicts are resulting in the deaths of heart and cancer patients because they cannot get the care they desperately need.

          The edicts are also threatening hospitals with bankruptcy. Banned from treating anyone except COVID-19 patients, hospitals have no income, and have been forced to shorten hours and cut staff — in the middle of an epidemic— with some hospitals on the verge of closure forever.
          Meanwhile the retail industries are getting wiped out. The clothing industry is shutting down. The flower and events industry is shutting down. The department store industry is shutting down. The theme-park industry is shutting down. The beer and pub industry is shutting down.

          In fact, the entire economy is shutting down. New business starts have basically ceased, with the index of leading economic indicators experiencing its biggest crash in March in its entire sixty year history.

          • 0 avatar
            Lou_BC

            @thelaine – Once again, you don’t actually think through what you post. “deaths of heart and cancer patients” Dealing with heart attacks, stenting, bypasses etc are all essential services. Cancer care is also essential. Non-essential would be delaying that knee or hip replacement. The operative phrase(no pun intended) is “life or limb threatening”. Those will get done.

          • 0 avatar
            ajla

            The hospital won’t tell you to just stay home and die but cancer treatments definitely are being disputed. It isn’t only hip replacements getting moved around or cancelled.

            npr.org/sections/health-shots/2020/04/02/825937343/as-coronavirus-strains
            -hospitals-cancer-patients-face-treatment-delays-uncertain

            There are also worries about people staying away from hospitals when they might have serious but otherwise treatable conditions.

            inquirer.com/health/coronavirus/coronavirus-covid-19-delayed-
            care-heart-attack-stroke-20200421.html

            I don’t have the answer on what the solution is to all of this, but the nonCovid medical impact is definitely a thing and it is one of the first items most states are trying to address.

          • 0 avatar
            thelaine

            Here’s the thing: there’s no evidence of lockdowns working. If strict lockdowns actually saved lives, I would be all for them, even if they had large economic costs. But the scientific and medical case for strict lockdowns is paper-thin.

            https://www.thepublicdiscourse.com/2020/04/62572/

            But a little-noticed United Nations report out last week found that the massive disruptions and global recession caused by the shutdowns will disproportionately harm children. It says that 60% of children worldwide are in countries under partial or full lockdown orders.

            Based on current estimates of the economic damage caused by the shutdowns, the International Monetary Fund figures a 3% decline in global GDP.

            “Hundreds of thousands of additional child deaths could occur in 2020,’” which “would effectively reverse 2 to 3 years of progress in reducing infant mortality in a single year.”

            Many of the government lock downs have included edicts that prevent hospitals and doctors from doing what the government considers non-essential procedures. No one asked any doctors it appears, because these edicts are resulting in the deaths of heart and cancer patients because they cannot get the care they desperately need.

            The edicts are also threatening hospitals with bankruptcy. Banned from treating anyone except COVID-19 patients, hospitals have no income, and have been forced to shorten hours and cut staff — in the middle of an epidemic— with some hospitals on the verge of closure forever.

          • 0 avatar
            thelaine

            Let’s stop the madness.

            Kerry Mergen, a contract egg farmer near Albany, Minn., got word on a Wednesday the chickens in his barn would be euthanized. A crew showed up the next morning and started gassing the birds with carbon dioxide.

            The sudden drop in demand for food at restaurants, school cafeterias and caterers shut down by the pandemic has ripped through farming. Milk has been dumped, eggs smashed and ripe lettuce plowed under.

          • 0 avatar
            thelaine

            If you can only dispute one half of one sentence in that whole post, Lou, I think you are missing the bigger picture. The economy is melting down. There is more going on than wuhandeathwatch. There are tradeoffs and consequences for actions that are being taken. The economic lockdown is a killer too. The cure is worse than the disease. Stop the madness. Open the economy.

          • 0 avatar
            Art Vandelay

            I can’t again speak for everyone, but I have first hand knowledge of a couple of people getting their Chemo as normal. One found out in the middle of all this too.

          • 0 avatar
            HotPotato

            As Los Angeles mayor Garcetti recently observed while giving many city workers a long, er, unpaid vacation, this will be worse than the 2008 recession, but the alternative is far worse. Best we take our advice on epidemics from epidemiologists, not Roman military historians or guys on the internet.

            P.S. No, cancer care is not being disrupted, not deliberately anyway. That’s explicitly NOT part of the stay at home orders. I’m close enough to the field to know, and I personally know cancer patients being treated per usual.

      • 0 avatar
        ajla

        “FDIC will go bankrupt; your money in the bank will go bye-bye. The economic domino effect will be devastating. Then of course nameless companies will buy up the defaulted loans for next to nothing”

        If the banks fail en masse then we’re looking at riots and warlords not GloboTech bargain shopping.

      • 0 avatar
        RHD

        This happening is part of the risk that lenders take in making these loans. It’s how they justify the ridiculous interest rates. It’s part of the business plan.
        So no boo-hooing allowed. Tough dookies, go repossess the crummy cars and try to sell them again. Everyone is being affected for a few months, then life will return to normal.

    • 0 avatar
      mcs

      “Literally NO ONE predicted this.”

      https://en.wikipedia.org/wiki/The_Last_Man_on_Earth_(TV_series)

  • avatar
    JMII

    The check is in the mail, no worries.

  • avatar
    ToolGuy

    “payment-deferral program”

    Remember when you played your sister at Monopoly and you were winning badly, but you wanted to go on winning so you kept loaning her money to cover the rent you were charging her? This is like that.

    [And then for some reason she didn’t want to play the same game next time. Huh.]

    • 0 avatar
      Imagefont

      Unfortunately there’s no interest deferral, you still have to pay for the thing. Painful to make it up later. A friend of mine told me once that you eventually reach an age where you just want a car that works – I’m there.

  • avatar
    krhodes1

    I am shocked, SHOCKED, that people who are laid off can’t make their car payments. And that the whopping $1200 in government cheese isn’t keeping them above water. Given the average American calls the change in thier couch cushions thier “savings account”.

    That said – my lenders are THROWING deferment and help offers at me (that thankfully I don’t need at this point). But that probably isn’t the case if you have a subprime loan to start with? Anyone know? Are predators being predatory, or are dumb people just being dumb?

    • 0 avatar
      dal20402

      As a general rule, the worse your score, the worse treatment you get from lenders. That’s not just about interest rates, but also about service and even basic honest treatment (subprime borrowers are way more vulnerable to fraud). I’m sure there are lots of subprime lenders who are sending the repo man just like they normally do, or even earlier. I know a bit more about residential rent relationships, and a lot of low-end landlords are taking the harshest position with their tenants that local law will allow.

      This sort of thing is dumb from a business perspective. History shows over and over again that a very forgiving approach to debt ends up benefiting everyone on both sides of the transaction. But most people don’t operate based on analysis of what’s best for business, but on their ideas about who is “deserving” and “undeserving.”

      • 0 avatar
        krhodes1

        Kind of what I figured, but I have no experience with borrowing money with lousy credit – when I had lousy credit, I didn’t borrow money from anyone but family and my pre-existing student loans.

        • 0 avatar
          dal20402

          I did a consumer credit clinic in law school and saw some hair-raising conduct.

        • 0 avatar
          Art Vandelay

          Man when I had lousy credit my family was the least likely to loan me money…They knew it was as good as gone. Pay Day loans were where it was at. Then again, nobody held a gun to my head and the situation was 100 percent my doing.

  • avatar
    Imagefont

    People who make 150k/year with OT and are driving $50k pickups for commuting purposes…. No, they don’t deserve help, they deserve to learn their lesson the hard way.

    • 0 avatar
      R Henry

      What you describe is known as “Moral Hazard.” Whenever humans are insulated from the consequences of their bad decisions, they are prevented from learning necessary lessons. In this case, loan forgiveness and/or forebearance is precisely the wrong approach.

    • 0 avatar
      Lou_BC

      @Imagefont – a lot of Canadians are in this boat right now. Alberta especially. Skilled and unskilled labour making massive sums of money in oil patch but not saving any of it. I had friends like that in the forest industry. New car and truck every year, big vacations, party animal life style and then sh!t happens and they are destitute. I even know professionals who’ve done the same thing except their jobs aren’t tied to the economy but are still screwed.

      • 0 avatar
        Imagefont

        Lou_BC
        My job takes me to the oil patch to commission and repair equipment, in the US and Canada and other places. I see so many super expensive tricked out pickups. And I have nothing against pickups, and a lot of these guys are financially savvy and can really afford them, but some of these guys are spending their OT like it’s never going to end and will worry about tomorrow when it gets here. Many are highly leveraged and trying to live beyond their means, but they think it’s normal. It would scare me to death to be in that situation even if times were good.

        • 0 avatar
          jalop1991

          “and a lot of these guys are financially savvy and can really afford them, but some of these guys are spending their OT like it’s never going to end and will worry about tomorrow when it gets here. Many are highly leveraged and trying to live beyond their means, but they think it’s normal.”

          You mean like major league sports players?

    • 0 avatar
      krhodes1

      If you are making $150K a year, you should be able to drive a $50K car if you want to and not need any help. At $150K/yr they will have far more disposable income than someone making $60K/yr and driving a $20K car, which presumably you would be OK with for some reason? Not sure why there would necessarily be a lesson to be learned here?

      Ultimately, given the incredibly wide-ranging effects of the current crisis, I think literally everyone but the most fortunate may need some help through this. I try to be financially smart, but the reality is that I am mostly in the position I am in because I don’t have any kids and I live in a very low cost of living area.

      • 0 avatar
        Art Vandelay

        “At $150K/yr they will have far more disposable income than someone making $60K/yr and driving a $20K car, which presumably you would be OK with for some reason?”

        Envy is the word you are looking for. That would be the reason here.

    • 0 avatar
      VWGolfGuy

      California C/O parking lots are packed with these 50k+ commuter trucks with lift kits and mud tires. My buddy has one with 20k worth of suspension work complete with chrome skid plates, guy caps out OT every month. My little golf is sandwiched between two at the moment, and OT has dried up.

    • 0 avatar
      smartascii

      We’re talking about subprime borrowers here. People who make $150k/yr and have $50k pickups generally aren’t those people. $1k/mo on $10k of take-home pay is maybe not the best decision, depending on how you feel about debt, but it’s not ridiculous. We’re talking about people who have jobs you can’t walk to and no access to public transportation, who make very little money and can’t save enough to pay cash for even basic, reliable transportation. These are the people who don’t have $400 for an emergency. They’re also people who get fired if they call into work and say they can’t make it because the car won’t start.

      So they go to the only places they can get financing, which is BHPH lots or financing operations with usury terms, and they wind up borrowing $15k at 20% interest to buy a car that’s worth nowhere near $15k, even at retail. They send half their paycheck to Screw-U Finance Co., because they have no other option. Very little has to go wrong for the whole house of cards to come crashing down, and right now, a lot has gone wrong.

      The same thing is going to happen to a lot of much wealthier people who made much better financial decisions in the coming months, and hopefully a little bit of empathy will come from this, since a startlingly large percentage of people have to have something bad actually happen to them before they’re able to acknowledge that when it happens to other people, it might not actually be their fault.

      • 0 avatar
        Zipster

        Several years ago,on this site a character by the name of Jack Baruth wrote an opinion piece which very convincingly made the case that poor people could not afford cheap cars. This is what we should be concerned about not the idiot that overspends for the sake of his ego.

        • 0 avatar
          JimC2

          ^^^ Yep.

          The phrase that I remember is “it’s expensive to be poor.” Poor people problems aren’t limited to driving an old, sad looking car, having barely enough money to maintain it, or even not really having enough money to afford an expensive repair. Sometimes the person has a job that doesn’t have great sick benefits or flex time- this makes it harder to come in an hour or two later than normal and have an understanding boss for your car trouble. If it’s going to take a few days to fix the car then not having good backup transportation is another poor people problem. And so on.

          Not necessarily a sympathy piece or a judgmental piece, more like saying there are a few different kinds of circumstances that different people out there live with.

          • 0 avatar
            Art Vandelay

            I can’t speak for everyone, or anyone else for that matter, but back in the days when I couldn’t have purchased a Kia with Warren Buffet as a cosigner my credit was so bad it was absolutely one person’s fault…mine. That isn’t everyone for sure, but it is a lot of people so how do you intend on weeding them out?

        • 0 avatar
          HotPotato

          Jack was right. The best decision I ever made was to stop trying to buy a car for the tiny amount of cash I could save, because it inevitably meant enormous repair bills at credit-card interest. At some point I swallowed hard, took out a very long loan for a clean two-year-old economy sedan from the new-car dealer, and…whaddaya know, I came out ahead. Way ahead. There are a lot of reasons I’m not poor anymore, but this is a significant one.

          • 0 avatar
            JimC2

            “The best decision I ever made … took out a very long loan for a clean two-year-old economy sedan”

            And then keep it for a long time.

            I think a lot of people get this. We don’t need to look any further for the evidence than observing all of the 5~10 year old vehicles on the road.

            But at the same time I think a lot of the subprime market is probably at least one rung below the folks who select and finance their vehicles the way you have done… for better or for worse, whatever circumstances and/or life choices led to it in each person’s case.

      • 0 avatar
        HotPotato

        Amen.

  • avatar
    R Henry

    Entrepreneurs: Go buy yourself a tow truck (probably a handgun too) and get into the RePo biz. Gonna be a VERY high demand for RePo services!

    • 0 avatar
      krhodes1

      Not sure there really will be – who’s going to buy those cars? The auctions are mostly closed too.

      These are not normal times and I think a lot of normal rules will not apply.

    • 0 avatar
      HotPotato

      Those repo guys have some crazy-specialized trucks that let them act with lightning speed without ever leaving the cab. I don’t know how successful Joe Blow is going to be buying an old used hook & chain truck when the target doesn’t WANT his car towed.

      Reminds me of when there was a big boom in the armored truck business and every Joe Blow thought he could buy a used bread truck and give Brinks a run for their money, only to learn — when floors collapsed and left the money on the asphalt — that currency, in large quantities, is a lot heavier than bread.

  • avatar
    SCE to AUX

    Regardless of how one feels about car loans and the involved parties, people living hand-to-mouth are going to prioritize eating today over losing the car in 6 months.

    This is sad, and will get a lot worse. And it may never return to ‘normal’ as some industries and companies simply don’t come back.

  • avatar
    gasser

    The inability of the finance arms of automakers to resell the subprime loans in a package will really hold back sales of second tier manufacturers.

  • avatar
    dwford

    Are auto lenders putting “notes” in people’s credit files when they take these deferment offers like the mortgage lenders are?

  • avatar
    cprescott

    I remember when I lost my job back in 2010 during the Obama failed recovery and I had contacted creditors during that asking for ability to make smaller payments on debts and I cannot believe how rudely I was treated by them. All I wanted was to reduce payments to $25 per month (usual payments were $50 or less) and needed to fit these payments in my unemployment insurance budget.

    Not one worked anything out with me to reduce payments.

    So I stopped making payments entirely; yes they tried to sue me but I read up on how to defend myself against debt collectors and beat every one in court.

    I was lucky two years later to get a regular paying job (the one I have now though I’ve received many promotions). It took me years to get my credit back to good – but I learned a valuable lesson. Credit cards are for emergencies only – and never have one with any annual fee. I have three now that routinely are paid off each month (to help build my credit back) – two were virginal until I had a $1000 cat vet bill. I used those for several weeks and my stimulus check paid them both off.

    I have a car loan and I pay $50 extra per payment to get that thing paid off – thankfully I bought under my means and I saved $5-8k by purchasing a three year old, like new car instead of buying new.

    I say this because some of us have been in a bad place before and we learn. Looking back I was foolish on using credit cards to buy things now when i could have just saved up for them (like I do now). I regret ever buying a new car and taking the hit on depreciation – my current car had someone else take that hit.

    I’ve been there and lived the shame of bad financial moves – I learned and I wish others would listen to radio financial shows like I have done and to see that being slaves to credit cards and finance companies is the worst thing to have. Now I get to use the card for a week or two, pay off the balance as needed – and all of this is rebuilding my credit score so that I can get lower rates in the future.

    • 0 avatar
      krhodes1

      Well done to get yourself out of the hole. I had to do the same after being stupid during and immediately after college. Took a good 10 years to get my credit back to good enough to be able to buy a house at a decent rate.

      Personally, I have no problem with owing money – but I HATE paying interest (at least much beyond the rate of inflation)!

      Credit cards can be a great tool – IF you have the wherewithal and discipline to never, ever carry a balance. I have literally hundreds of thousands of airline miles and hotel points and Amazon points from putting everything through my cards, but it has been waaay more than a decade since I carried a balance to the next month.

      I think the radio shows have to be taken with a bit of a grain of salt – debt can be a powerful tool, but you need to be in a position to be able to use it, and have the self-discipline to not abuse it. There is a happy-medium in all things.

    • 0 avatar
      Lie2me

      “2010 during the Obama failed recovery”

      You mean the one he inherited from Bush? Do you remember 2008?

      Do these bald faced lies work on anybody other then your hillbilly neighbors and family?

      • 0 avatar
        JimZ

        I swear people like him could stand out in the blazing August sun and try to tell everyone in the vicinity it’s actually the middle of the night and snowing. Große lüge works again and again.

        “His primary rules were: never allow the public to cool off; never admit a fault or wrong; never concede that there may be some good in your enemy; never leave room for alternatives; never accept blame; concentrate on one enemy at a time and blame him for everything that goes wrong; people will believe a big lie sooner than a little one; and if you repeat it frequently enough people will sooner or later believe it.”

        sound familiar?

        • 0 avatar
          Art Vandelay

          Weren’t the 2 of you saying it was in bad taste to diss someone’s personal experience in some other thread?

          • 0 avatar
            JimZ

            that’s different. what I said to you is I believe your experiences but don’t think you can apply them to the general case. What I’m saying about cprescott is that I don’t believe what he’s saying period.

          • 0 avatar
            Lie2me

            Nice try, Art, but no one is dissing anyone’s ” personal experience”, however I was dissing a bald faced lie. Not really the same thing.

            If you’d like to take it further I would be happy to go a couple of rounds with you. I love comparing the end of the Bush economy with the end of the Obama economy with the present Trump economy. It’s a favorite argument of mine

          • 0 avatar
            Art Vandelay

            That wasn’t to what I was referring. I said you were correct there, but that was not in fact what I was doing.

            I believe the term you used was that it was crass to comment on someones personal experiences which you know nothing about.

          • 0 avatar
            Art Vandelay

            And @Lie2me…pass. I don’t derive any of my identity or personal satisfaction from who occupies the White House nor is my financial well being particularly linked to it. I have solid beef with pretty much every President in my adult life (Clinton to now) while simultaneously liking some things they all did. I have no need to feel superior over you via some internet rage fest as I’ve done well for myself and can derive personal satisfaction in other, more productive ways.

            I’m not a Trump fan, I could have been easily swayed to support the Democrat. But not this one. He is an idiot. Trump being an idiot doesn’t change that. I’m just not going to vote for another idiot and have no use for the current politics as a sport attitude in this country where every Political matchup is Bama vs. Auburn, especially when I think the average fan of that matchup is likely more intelligent than either of the 2 candidates.

            And I hate Bama. And Auburn. But Nick Saban would be a better President than either of the current options. Tommy Tuberville (Former Auburn Coach) looks pretty likely to win a Senate seat here so maybe one day we will actually get that battle. It would have a better outcome than the 2020 election no matter who wins either because at the end of the day, at least Saban and Tuberville are again, not morons. Trump and Biden are morons. Both of them.

          • 0 avatar
            Lie2me

            “I believe the term you used was that it was crass to comment on someones personal experiences which you know nothing about.”

            Art, what are you talking about? I never said this

          • 0 avatar
            Art Vandelay

            Then it was Jim

      • 0 avatar
        MiataReallyIsTheAnswer

        “2010 during the Obama failed recovery”

        You mean the one he inherited from Bush? Do you remember 2008?

        *******************************

        That’s the one – the one that Clinton propagated, remember?

    • 0 avatar
      jalop1991

      Credit cards aren’t for emergencies only.

      Not paying the full amount due at the end of the month–THAT’S what might be for emergencies, sure.

      But credit cards as a general rule? They’re just a tool, like a shovel or a kitchen knife. Sure, your neighbor may have whacked his wife in the head with a shovel and killed her; that doesn’t mean you shouldn’t have a shovel to dig holes with.

      Use the tool properly, or–like Macgyver–weirdly if you’re in an emergency. Perfectly fine.

      Using the tool weirdly all the time? Using the wrong tool for the job every time? Pay the consequences.

      • 0 avatar
        Art Vandelay

        This. I use them all the time…can’t remember the last time I carried cash. I always pay them in full at the end of the month. Had enough points from all the business travel last year (and Hilton points) to take the family to France for a week. The problem isn’t the credit card…it is the cardholder typically.

      • 0 avatar
        Scoutdude

        Agreed, use the tool properly and no one gets hurt, use it recklessly and eventually someone is going to get hurt, really doesn’t matter what the tool is.

        The only thing I typically use cash for is at a fast food restaurant or convenience store, occasionally some place like Home Depot because I just needed a couple of bolts or something like that and the total is ~$5 or under.

    • 0 avatar
      Lou_BC

      @cprescott – well done.
      I’ve read several articles that put forward the argument that any economic growth seen in most mature economies has come from borrowed money. Real growth once debt is factored out is really 1% or less. Recessions can be viewed as hangovers after the big party. People are put in a position to stop spending and start paying off debt. That triggers a recession. Federal reserve banks keeping interest rates low has contributed to the accumulated debt. All they care about is people making payments. As long as cash keeps circulating, the system stays afloat.

  • avatar
    87 Morgan

    The repo trucks will not be heading out anytime soon. The finance companies treat bad debt differently; once you repo it is bad debt and goes not the balance sheet. If the customer is late, or behind a month or two it is still an asset that is performing; performing better actually when late fees are factored in.

    With the lack of liquidity in the used car market I can not think of a reason why a lender would want to ramp hooking late pays. The customer could be $900 behind on a $10,000 note balance attached to a car the lender thinks has a value of 9k, so $1900 loss plus collection and auction fees. However, with cars stacking up at the auctions, said car could sell for $7100 when the auctions open so the loss incurred swells to $3800 plus collection and auction fees. In the case of CAC (lender mentioned) they take a discount at funding typically 10%-19% of the initial loan amount so they have a reserve built in already to handle the $1900.

    • 0 avatar
      ToolGuy

      ^^ And this is why we come to TTAC. (Thank you.)

    • 0 avatar
      SaulTigh

      That’s it in a nutshell. This situation will have everything out of wack for a long time because everything is so interconnected in a capitalist economy, and assessing risk will be very hard in the area of financing. For a while, maybe even a year or more, forbearance will be the name of the game, with the hope that you’ll get back to work and be willing to resume making payments.

  • avatar
    volvo

    Yes thank you very much for that detailed explanation.

  • avatar
    randyinrocklin

    All of this pain and suffering, because of two quack doctors that had fake models, created by dumb elites who think they know better than anyone else. What a joke, with their wild a** predictions and prognostications that were waaaay off.

    • 0 avatar
      Lie2me

      Dr. Phil and Dr. Oz? Yeah, those two are a trip :(

    • 0 avatar
      thelaine

      We reacted with panic and hysteria to a seasonal virus, and as a result, have destroyed the lives of many of our working poor and lower middle class. I hope we are properly ashamed of our collective cowardice and will never react to a national challenge by destroying our economy. It is never a good idea. It is the basis of our national strength and our ability to protect our nation and care for our citizens.

      We should have rallied around our old people and let the healthy people work. Instead, we have thrown millions into unemployment. The crime and drugs and violence and suicide, welfare dependence, community destruction and premature deaths from all causes will inevitably follow. It was a terribly selfish response, and truly shameful.

      • 0 avatar
        SCE to AUX

        “…crime and drugs and violence and suicide, welfare dependence, community destruction and premature deaths”

        These things happen all the time – why are you reacting with panic and hysteria?

      • 0 avatar
        Lou_BC

        “The crime and drugs and violence and suicide, welfare dependence, community destruction and premature deaths from all causes will inevitably follow. It was a terribly selfish response, and truly shameful.”

        He sounds like a Lefty to me..or is that leftie?

        Bleeding heart liberal…

  • avatar
    Carrera

    Looking at the photo of this article…isn’t he Bashar from the Israeli anti-terror show FAUDA? By the way, great show.

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