Author Topic: Auto Loans  (Read 1490 times)

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kevinmanheim

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Re: Auto Loans
« Reply #15 on: April 17, 2017 01:58:34 PM »
Some credit unions are making stupid loans on vehicles.

DCU will go 120% LTV.

Penfed -- 110% LTV

Both below 2% APR.

This, at a time when used car values are declining.

BrokeBob

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Re: Auto Loans
« Reply #16 on: April 17, 2017 02:20:00 PM »
I can see maybe the down payment angle, but not the interest rate. 25% of nothing is still nothing.

Anything I say here is conjecture, so be warned.

I assume that the defaulted buyers usually at least pay off a few months of the loan.  SOME of the buyers never default.  Assume a 50% default rate.  The money paid by the people who DON'T default, plus the down payments, plus the money paid by people BEFORE they default, plus the higher margin the subprime places can charge, is probably enough to make this profitable. 

In some extreme cases, a buyer will almost have the loan paid off before defaulting.  In those cases, there is quite a bit of profit for picking up a 4-year old car with a high resale value for the cost of eating the last year of a loan that has already shown a profit due to the high margins and high interest rate. 

CleaningUp

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Re: Auto Loans
« Reply #17 on: April 17, 2017 03:15:16 PM »

Bingo.  There absolutely is a major increase in sub-prime auto lending happening and it's worse than the peak of the housing bubble. 


This has startling similarities to the housing lending, but with a covering asset at a lower price point with higher interest rates.

I would like to see what the default interest rates might be on this type of loan.  Anyone have a copy of one of these contracts that they might want to share with us?

I get the feeling that we are going to see another wave of new memebers on DB over the next few years.

flaccito

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Re: Auto Loans
« Reply #18 on: April 17, 2017 03:40:27 PM »
Quote from: CleaningUp
This has startling similarities to the housing lending, but with a covering asset at a lower price point with higher interest rates.

I would like to see what the default interest rates might be on this type of loan.  Anyone have a copy of one of these contracts that they might want to share with us?

I get the feeling that we are going to see another wave of new memebers on DB over the next few years.

It's already happening with the student loan debtors, it wouldn't surprise me at all.

fisthardcheese

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Re: Auto Loans
« Reply #19 on: April 17, 2017 04:31:52 PM »
This is the most comprehensive take I've seen on it.  It explains how the dealers make money off reselling the same car multiple times over.

https://www.youtube.com/watch?v=4U2eDJnwz_s

Slight NSFW warning for the occasional language.
11 Arb Settlements (9 AAA, 2 JAMS)
3 JDB Suits Dismissed With Prejudice (2 pro-se, 1 consumer atty)
3 TCPA Settlements (2 pro-se, 1 consumer atty)
2 FCRA Settlements (consumer atty)
1 FDCPA Settlement (w consumer atty)
1 Small Claims Win (pro-se; Landlord/state consumer law violations)
1 State UDAP Settlement (ITS)
1 Federal PTC Settlement (before hearing; pro-se)

BrokeBob

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Re: Auto Loans
« Reply #20 on: April 17, 2017 06:43:58 PM »
I hope I am wrong, but I see another bubble, and I see it popping within the next few years.

On the good side, the banks are a lot stricter about real estate loans. 

It also appears the banks are stricter about the credit card loans, but I could be wrong.  As one poster mentioned, a lot of the people who were destroyed in the last bubble are now seeing the baddies come off their CRs.  I think I might have one left for another month or two, but I have vastly better credit now than I did a year ago.

There are three things I see as signs of impending disaster, in ascending order. 

3.  The subprime auto loans.  Discussed in this thread quite a bit.

2.  Student loans.  This has been discussed quite a bit in a lot of threads.  This will, at some point, cause MAJOR problems in the US economy, which will cause major problems in the world economy, but it isn't the biggie YET.  A few reforms could alleviate the student loan problem, but the current federal government seems to be anti-reform (executive and both parties of congress)

And, the biggie --

The China Real Estate Bubble. 

To give perspective, consider what happened with the Japan Real Estate Bubble in the 1980s.  When that crashed, it took down a lot of urban US real estate with it.  I had a co-op in NYC that lost 50% of its value a year after I bought it.  Oil prices went down, and condos in Houston lost 70-80% of their value.  Houses were not hit nearly as hard, nor was "flyover country" hit very hard.

Some big vacation areas were hit even harder.   Honolulu went into a slump that lasted over a decade.  (Interesting, Honolulu tourism industry is even MORE Japan oriented now than it was then, but the outer islands are more Mainland US oriented, and have seen more growth.) 

Stock market crashed.  The famous Wall Street Charging Bull was put up as a way to encourage the country, which was then in a nasty bear market. 

The Japanese stock market crashed, and I am not sure it ever completely recovered.  The US export market probably saved the Japanese economy from complete destruction.  The Japan boom never took off again, which is probably better for the regular working Japanese. 

This was due to a crash in a market in a country with about half the population of the US. 

Consider what effect the real estate bubble in China is having. 

Chinese real estate prices are skyrocketing. 

While the Japan real estate bubble strongly effected places like NY and LA and especially Honolulu with strong Japanese investment, look at where the Chinese have invested:

Singapore, to the point where Singapore is the most expensive city in the world.  There are even massive real estate developments catering exclusively to Chinese nationals looking to move their assets overseas in the parts of Malaysia close to Singapore.

West Coast North America, esp. Vancouver.  LA and SD have shot up as well.  The SF Bay Area has had a real estate bubble far bigger than the one in 2008, due to the combination of rich Chinese parking their assets overseas and the various tech (biotech and internet, esp.) sectors rising. 

New York and suburbs.  London.  Paris.  Toronto.  All the big cities in Australia. 

At this point, the Chinese see the bubble about to burst, so they are putting restrictions on Chinese taking their money out of the country.  They are worried about a bust of the Renminbi (Yuan).   I think the idea is, if they restrict taking RMB out of China, then that money will have to be invested in Chinese real estate, which should keep the bubble from popping for another year or two if lucky, and in the meantime will soften the bubbles outside of China, perhaps popping a few (the bubble of Chinese investments in the part of Malaysia near Singapore may have already popped.)

The Chinese restrictions on moving RMB out of the country could be enough to cause a real estate crash in the cities I've mentioned, or maybe not.  When the China RE bubble bursts, accompanied by the RMB restrictions, that could set up a worldwide depression that would make the 2008 Great Recession look like Sunday in the park. 

It will be interesting to see what the traffic in Debtorboards will be like if that happens, as in the ancient Chinese curse, "may you live in interesting times".

Flyingifr

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Re: Auto Loans
« Reply #21 on: April 18, 2017 02:40:17 PM »
The one problem with the Chinese government restricting the movement of RMB (Yuan) out of China is that it applies to Yuan only. I moved over a quarter of a million Yuan out of China when I came home simply by converting it to USD and hand-carrying the Benjamins. I declared them at US Customs, was able to show they were legally earned (Customs didn't even want to see the proof and actually refused to look at it) and I was in the USA with a stack of Benjamins. The restrictions were on ME as a foreigner in converting the Yuan to USD so I had a Chinese friend do it for me. Chinese nationals in China have no restrictions on how much RMB they can convert to foreign currency. As a foreigner I could only convert 10,000 RMB a day.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

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BrokeBob

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Re: Auto Loans
« Reply #22 on: April 18, 2017 04:27:36 PM »
Many years ago I lived in Taiwan, which at the time had currency restrictions on both the New Taiwan dollar (NT or Yuan) AND the US dollar, and the Yen and some other currencies.  This was many, many years ago, and the restrictions are gone now, but at the time I could only take $1000 out of the country.  Taiwan was a military dictatorship at the time. 

I wound up having to convert my NT $ into US $ on the black market, mostly in the form of travelers checks.  But some was in cash. 

When I went home on the airplane, I had $900 in my wallet, and a few thousand in my shirt pocket. 

In the line, they separated the men and the women for a pat down and wallet check.  There was a Japanese gentleman two people ahead of me in line.  The guy doing the wallet check seemed like a real sadistic fellow.  When he counted the Yen the Japanese guy had, he broke into a wide grin, and motioned for cops to come and drag the guy away. 

Let's say I was a little nervous, but I wasn't going to let this guy see me sweat. 

My turn, he counted the US$ in my wallet.  As the amount got higher and higher, his scowl started to turn into a grin. He thought he caught another one.  When the $ count stopped at $900, he looked furious.  He re-counted the money a few more times, getting angrier and angrier.  Finally, he practically tossed my wallet back to me with the $900. 

Fortunately, he never checked my shirt pocket. 

I was a lot younger and stupider in those days.  I would strongly recommend that any American living in a military dictatorship abroad NOT tempt fate that way. 

Flyingifr

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Re: Auto Loans
« Reply #23 on: April 18, 2017 09:34:07 PM »
The Chinese did ask to see my RMB as I left but because I had already converted it to USD I had less than 300RMB which is way below the allowable amount. They didn't ask for USD so I didn't volunteer any. At US customs they asked about USD and I told them about it. They didn't ask about RMB and I didn't volunteer it.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Debtors Exams are the perfect place for us Senior Citizens to show off our recently acquired Alzheimers.

Founder of the Credit Terrorist Training Camp (Debtorboards)

BrokeBob

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Re: Auto Loans
« Reply #24 on: April 18, 2017 09:57:00 PM »
The restrictions don't really hurt the cash-rich elite who want to park a lot of their money overseas in real estate. 

Convert RMB to US$, convert US$ to real estate, just as always.

The restrictions really hurt the Chinese middle class who want to buy property overseas on credit, make a down payment then pay monthly.  That is why low end developments, like the Chinese middle class development in the part of Malaysia near Singapore, are hurting. 

The very wealthy can continue to buy high-end properties overseas with cash, just as they have been for several decades. 

If they put stronger restrictions on, that is when you know the bubble is about to burst. 

BrokeBob

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Re: Auto Loans
« Reply #25 on: April 18, 2017 10:44:49 PM »
Probably the most interesting situation I ever had going through customs, a time when the alarm bells went off in my head, and I avoided possible tragedy.

One time, back when Taiwan was isolated from the PRC, I spent a short vacation in Hong Kong.  Like many people, I bought some Chinese clothes, and removed the tags for going through customs.  Like many people, I visited China, and had them please NOT stamp my passport so as not to cause trouble for me in Taiwan.  (I am very glad of this.)

Perhaps the stupidest thing was I got a souvenir PLA cap across the border, and put that in my pocket, hoping nobody looked in my pocket.  Since I wasn't on the bad-guys list at the airport, I sailed through customs.

I was seated next to a pretty young Taiwan Chinese lady from Taipei on the airplane.  She was getting very friendly, and we exchanged phone numbers.  As we de-planed, we went in different directions, me for the foreigners section, and she to the citizens section (which probably had more thorough inspections.)   Even the foreigners section was more thorough than I've generally had, say, entering the US from abroad.  They really did take a look at my luggage. 

Suddenly, the young lady asked me to take all her luggage through customs.  I may have been young and stupid, but not THAT stupid.  I figured she was probably also smuggling Chinese clothes through customs, and wanted ME to get stuck holding the bag if something went wrong.  Or, it could've been electronics, or even drugs. 

We did not part ways on friendly terms. and neither of us ever called the other one. 

One of my kids will spend the summer overseas, so I will make a point of giving a strong warning to never, ever, ever take someone else's stuff through customs.  EVER.  A few months later I read about some young ladies who carried bags through customs in Malaysia for some cute guy they met on the plane, and the girls were sentenced to death.   

tye78

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Re: Auto Loans
« Reply #26 on: August 21, 2017 06:10:33 AM »
Subprime auto loans. Yea, that could be a bubble. It sucks b/c I work in the auto-industry. I wonder why people can't just save up enough money and purchase a "new-to-you" car.

It might be a good idea to have some type of financial education in grade school to help guide future working-adults on saving and wise financial management. That might be the end of any future "bubbles" we might have.

fisthardcheese

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Re: Auto Loans
« Reply #27 on: August 21, 2017 10:47:25 AM »
Subprime auto loans. Yea, that could be a bubble. It sucks b/c I work in the auto-industry. I wonder why people can't just save up enough money and purchase a "new-to-you" car.

It might be a good idea to have some type of financial education in grade school to help guide future working-adults on saving and wise financial management. That might be the end of any future "bubbles" we might have.

The short of it is because wages have not kept up with inflation.  We now pay way more for goods and services as a percentage of our pay than we did 20 years ago leaving little or nothing left after essential bills are paid for a very large portion of the population.  The other aspect is simply a lack of reliable full time jobs combined with a bit of entitlement mentality and you see what happens.

Besides all that, the folks in the sub-prime auto lending industry see the billions that the banks made with absolutely 0 negative impact or consequences once the bubble burst. No one was prosecuted and the government propped up the businesses so they did not go under.  Who wouldn't see that and think it's a great way to do business?
11 Arb Settlements (9 AAA, 2 JAMS)
3 JDB Suits Dismissed With Prejudice (2 pro-se, 1 consumer atty)
3 TCPA Settlements (2 pro-se, 1 consumer atty)
2 FCRA Settlements (consumer atty)
1 FDCPA Settlement (w consumer atty)
1 Small Claims Win (pro-se; Landlord/state consumer law violations)
1 State UDAP Settlement (ITS)
1 Federal PTC Settlement (before hearing; pro-se)

montag

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Re: Auto Loans
« Reply #28 on: September 01, 2017 06:22:55 PM »
Subprime auto loans. Yea, that could be a bubble. It sucks b/c I work in the auto-industry. I wonder why people can't just save up enough money and purchase a "new-to-you" car.
At least the fools who made those loans won't have as much leverage to cry to the government at the sub-prime mortgage lenders did.

 

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