#Finance

Tesla’s second stock offering netted the automaker $738 million in cash for its Gigafactory, Model 3 development, and dealer and service upgrades, Bloomberg is reporting.

Banks exercised their options to buy more stock than the initial $500 million estimate, with underwriters Morgan Stanley and Goldman Sachs buying more than 2 million of the available 3.1 million shares. Tesla CEO Elon Musk said he would be interested in buying $20 million worth of shares in the offering.

(Before the stock offering, the banking arms of Morgan Stanley and Goldman Sachs loaned Musk a combined $475 million, to which Musk pays market rate and is separate from their investment divisions, according to the offering.)

Shares of Tesla were down more than 3 percent in Thursday trading to $245.

Wells Fargo will rein in its subprime lending business, limiting subprime car loans to 10 percent of auto loans it originates. According to the New York Times, the move comes amid concerns that the market for subprime car loans is expanding too quickly.

One of the best worst things about the Internet is how many “experts” there are on every single subject under the sun. Among the easiest subjects for anybody to obtain indisputable guru-like status on, based on what I see around the web, is finance.

And, boy, do they love to share their expertise, solicited or not.

Alan Zibel and Annamaria Andriotis of the Wall Street Journal (subscription required) report that consumer loans to borrowers with bad credit, including those for cars and light trucks, are now approaching 40% of loans issued, the highest percentage since the start of the financial crisis in 2007-08.

Almost four of every 10 loans for autos, credit cards and personal borrowing in the U.S. went to subprime customers during the first 11 months of 2014, according to data compiled for The Wall Street Journal by credit-reporting firm Equifax.

That amounted to more than 50 million consumer loans and cards totaling more than $189 billion, the highest levels since 2007, when subprime loans represented 41% of consumer lending outside of home mortgages. Equifax defines subprime borrowers as those with a credit score below 640 on a scale that tops out at 850.

Credit Unions will now be able to follow up with applicants who were unable to procure loans, and see if they pursued credit at other institutions, thanks to a new service from Equifax.

Today’s Chart comes from J.D. Power, showing the growth of long term loans in the Canadian car market. While 96 month loans are just starting to hit American consumers, the 8 year loan terms have been present in the Great White North for some time. A friend was recently looking at a modestly equipped Big Three Pickup, which would be used for work. The truck, with an MSRP of $35,000 CAD (plus 13 percent sales tax), was offered at 96 months for 3.99%. That would have added up to $6,000 in interest payments over the loan term.

ZF Friedrichshafen is buying TRW; JCI sold its automotive business to Gentex and Visteon. Are we in a new era of supplier M&A activity? The previous wave didn’t work out well – Dana, Tower, Dura, Lear and others ended up in Chapter 11.

So how about Federal-Mogul? They too went on an acquisition binge in the late 1990s, including the British firm T&N. In the process they took on debt, with a $2.75 billion package just for the T&N purchase. As with others, they bit off more than they could chew. Federal-Mogul’s downfall however wasn’t operational issues but one T&N factory that had used asbestos. The accompanying $1 billion-plus in costs tipped them into Chapter 11, and it took until 2007 – 6 years – for them to emerge. So where are they heading?

New rules being announced by the Consumer Financial Protection Bureau would mean that the captive finance arms would be subject to oversight from the CFPB.

Following GM Financial’s subpoena from the Department of Justice, Santander Consumer said that it had received a subpoena as well related to

“production of documents and communications that, among other things relate to the underwriting and securitization of nonprime auto loans since 2007,”

The topic of subprime auto loans has been a hotly contested one at TTAC, with numerous commenters defending both the practice and the stability of recent run-up in subprime lending.

Buried in a feel good story about auto loans comes the news that subprime auto loans are at levels that we haven’t seen in nearly a decade.

The Office of the Comptroller of the Currency, a government entity that regulates and supervises banks, is sounding the alarm regarding risks related to auto loans.

While perusing Chevy’s website to see if there is any color of the 2014 Corvette that actually makes the car look halfway decent, I came across the financing offer pictured above. And, no, I did not enter any personal info that would lead GM’s captive Ally Financial (or whoever the hell GMAC is now) to deem me only eligible for such a high interest rate. Just what is going on here?

A recent research note from Morgan Stanley dubbed Tesla the “world’s most important auto maker”, on account of its innovation in the area of electric vehicles, autonomous cars and connectivity. Could there be another reason for such enthusiasm?

OEM captive financing arms are increasing their share of new car loans, with banks resorting to underwriting riskier loans in the used car market and to less credit-worthy buyers.