Auto Loan/Credit Scandal

[Willi]

Crash and burn scenario looming for USA auto manufacturing and vehicle financing

Huge expansion of auto credit bubble about to burst. GM and Chrysler find themselves on track for more conflict with the government .

Both firms have seen their biggest lenders
[[GM Financial and Banco Santander)
subpoenaed by the Department of Justice in investigation into the lending and securitization of auto credit.

Lenders are slowing their auto-credit expansions as loan terms and defaults head upward.
The subprime lending boom that has kept GM and Chrysler in the game over the last five years.

[gameguy56]

Crash and burn scenario looming for USA auto manufacturing and vehicle financing

Huge expansion of auto credit bubble about to burst. GM and Chrysler find themselves on track for more conflict with the government .

Both firms have seen their biggest lenders
[[GM Financial and Banco Santander)
subpoenaed by the Department of Justice in investigation into the lending and securitization of auto credit.

Lenders are slowing their auto-credit expansions as loan terms and defaults head upward.
The subprime lending boom that has kept GM and Chrysler in the game over the last five years.

This sort of cements in my mind what I've been thinking for years. Ford is the only sane, competently run one of the Big3. GM and Chrysler are just zombie companies kept alive because they are too big to fail. The auto industry is on a slow death march, and will probably take the entire state of Michigan down with the ship.

[313WX]

This sort of cements in my mind what I've been thinking for years. Ford is the only sane, competently run one of the Big3. GM and Chrysler are just zombie companies kept alive because they are too big to fail. The auto industry is on a slow death march, and will probably take the entire state of Michigan down with the ship.

Ford is only competently run now because they brought in someone outside of Michigan's school of business management [[that is, Authoritative/Top-Down) to run it [[Alan Mullaly).

Remember that Ford was mortgaged down to the blue oval and just a few months away from bankruptcy itself back in 2006.

Hopefully, now that he's no longer in charge, they don't revert back to the same ol' ways.

[Dan Wesson]

Why? Are they selling crappy CDO's again?

[313WX]

Why? Are they selling crappy CDO's again?

They never stopped.

The government [[before the 2007 subprime mortgage crisis, via Freddie Mac/Fannie Mae, and now via the FED) has just been taking on this debt.

[gameguy56]

Ford is only competently run now because they brought in someone outside of Michigan's school of business management [[that is, Authoritative/Top-Down) to run it [[Alan Mullaly).

Remember that Ford was mortgaged down to the blue oval and just a few months away from bankruptcy itself back in 2006.

Hopefully, now that he's no longer in charge, they don't revert back to the same ol' ways.

I am not sure. But it seems they are really trying with things like TechStars mobility to actually be a forward thinking company.

[Willi]

The auto industry had big problems coming at them in 2015, and it ain't very pretty.

Credit Acceptance is not the first lender to receive subpoenas related to subprime auto lending. The Consumer Financial Protection Bureau [[CFPB) has issued similar requests to Santander Consumer USA and GM Financial in recent months.

Earlier this month, Toyota Motor Credit Corp. and American Honda Finance Corp. revealed in a regulatory filing that they could face an enforcement action from the CFPB and the U.S. Department of Justice. The captives said the two agencies allege that their auto lending practices — particularly policies that allow dealers to mark up consumer interest rates — resulted in discriminatory pricing of auto loans.

Back on December 2013, Ally Financial Inc [[ALLY.N) was forced to pay $98 million to resolve similar discriminatory loan pricing charges from the Justice Department and the CFPB.

[Lowell]

The car companies are good for now. 2015 promises to be a great year for them and the economy overall due to the oil price plunge. Zooming consumer confidence and falling unemployment will add more momentum. They should be able to out earn any penalties just as they have with this year's 60 million recalls, more than double any previous year.

A larger longer term threat may be what being called the battle for the dashboard where smart car applications threaten to leave them in the dust.

[Willi]

TransUnion’s annual auto loan forecast
calls for auto loan debt to continue to rise
to $18,244 at the end of 2015.
This would mark 19 consecutive quarters
of increases since the first quarter of 2011,
when auto loan debt per borrower
stood at $14,954

More people are defaulting on their car loans



A 400 to 500 dollar monkey on the back is hard to shake off and lingers for a good long while

USA needs cars at less sticker shock, less debt

[SyGolden48236]

TransUnion’s annual auto loan forecast
calls for auto loan debt to continue to rise
to $18,244 at the end of 2015.
This would mark 19 consecutive quarters
of increases since the first quarter of 2011,
when auto loan debt per borrower
stood at $14,954

More people are defaulting on their car loans



A 400 to 500 dollar monkey on the back is hard to shake off and lingers for a good long while

USA needs cars at less sticker shock, less debt

There is nothing wrong with financing an automobile. It is foolish to pay cash for a car when you can borrow the money for around 3%. Keeping your cash properly invested and earning a rate of return of about 3 times what you pay to finance a car is a much smarter way to go.

And if you want cars with "less sticker shock" as you say, then you need to lobby the government to stop requiring expensive emission controls and safety equipment on new cars. You will also have to learn to do without modern conveniences like remote starters, heated and cooled seats, bluetooth, voice recognition controls, streaming audio from your phone, in-car internet connections, DVD players, telematics systems, and the like. All of those things cost a great deal of money.

Cars cost what they do today because of governmental requirements and consumer demands.

[Willi]

Labor costs and profits is more truthful
when it relates to cost of a vehicle.
Build a bit more simple, sell a whole lot more.

Median household income in USA
is just around $ 50,000 dollars.
A majority are below that line,
while a few are above, hence avg.

[SyGolden48236]

Labor costs and profits is more truthful

Profit is not a dirty word and the more gadgets added to a vehicle the more profit is generated, usually. Profit is what keeps people employed.

[Cincinnati_Kid]

Profit is not a dirty word and the more gadgets added to a vehicle the more profit is generated, usually. Profit is what keeps people employed.

That's his point. Willi wants to see more people unemployed. He knows this area greatly depends on the auto industry, without it, the region is doomed. We already are seeing the effects as the industry requires less man-power to build a vehicle than 30 years ago. Yet he's a proponent of adding new industries that most of the citizens of this area aren't trained for. The school system in Detroit is a mess, so how do these people get the training they need? Willi has a lot of unrealistic assertions, but no solutions.

[BankruptcyGuy]

Just curious: I thought the subpoenas were related to racially discriminatory pricing. If so, that has virtually no similarity to the mortgage credit bubble.

Is there supposed to be a linked story? If so, I'd love to read it.

[Jimaz]

... Median household income in USA
is just around $ 50,000 dollars.
A majority are below that line,
while a few are above, hence avg.

By definition of "median," 50% are above and 50% are below.

[Dan Wesson]

Ha, just try and buy a plain Jane car.

Probably have to custom order it and wait.

[Willi]

Almost all of what I posted
-- came from sources "other" than myself

Get your shotgun out, shoot those messengers;
Find them on Google, just as I did.

It's called reading, research, summarizing, etc
instead of blowing empty opinions around.

[DetroiterOnTheWestCoast]

There is nothing wrong with financing an automobile. It is foolish to pay cash for a car when you can borrow the money for around 3%. Keeping your cash properly invested and earning a rate of return of about 3 times what you pay to finance a car is a much smarter way to go.

And if you want cars with "less sticker shock" as you say, then you need to lobby the government to stop requiring expensive emission controls and safety equipment on new cars. You will also have to learn to do without modern conveniences like remote starters, heated and cooled seats, bluetooth, voice recognition controls, streaming audio from your phone, in-car internet connections, DVD players, telematics systems, and the like. All of those things cost a great deal of money.

Cars cost what they do today because of governmental requirements and consumer demands.

Yes, we need more pollution, as well as deaths and serious injuries. As well as the increased insurance costs from the latter two. And while we are at it, how about diminished fuel mileage? I'm sure these low gas prices will last forever.

[SyGolden48236]

Yes, we need more pollution, as well as deaths and serious injuries. As well as the increased insurance costs from the latter two. And while we are at it, how about diminished fuel mileage? I'm sure these low gas prices will last forever.

Well, Willi wants cars to cost less and the things I mentioned are the major reasons cars cost what they do today.

Nobody is advocating for more pollution and traffic deaths. Don't be silly.

[BankruptcyGuy]

Maybe not.

This time around, he doesn’t see problems in the auto lending market. “These bonds are safer than U.S. Treasuries,” says Raynes. What’s more, unlike during the housing boom, there are no synthetic derivatives tied to subprime auto bonds that offer higher returns but amplify losses if the loans go bad.
Will the subprime auto loans deals he has seen do the type of damage to the financial system that subprime mortgage bonds did? “No way,” says Raynes.

http://fortune.com/2014/08/13/subpri...ns-toxic-debt/

[Willi]

People love that monkey on the back

Ally Financial is already the country’s largest auto lender in terms of total outstanding auto loans, with the lender reporting $58.7 billion in loans at the end of Q3 2014, compared to a figure of $55.2 billion for Wells Fargo.

People will continue to default, millions upon millions simply can't crack that nut each month

Banks have pushed for a larger share of the auto lending industry in recent years – often relaxing their lending criteria – to cash in on the growing market, even as the prolonged low interest rate environment puts pressure on their interest revenues.
--While used cars loans are a lucrative option for banks, with interest rates averaging 8.5% in Q3 2014, these loans have a higher chance of going bad – a situation made worse by the increase in subprime lending in the auto industry.

[Dan Wesson]

Another angle on auto loans is the equivalent of the second mortgage on the house only it involves the car. It's called a "Title Loan" with interest rates anywhere from 150 to 500%.

http://dealbook.nytimes.com/2014/12/...orrowers/?_r=0

https://www.youtube.com/watch?v=GkVS8QevsvY

[Willi]

I'm hoping people know GMAC is ALLY
--- car loans propped up by taxpayer money

The government estimates it has so far earned about $18.3 billion from selling Ally shares—a return of $1.1 billion, or about 6.4%, on its $17.2 billion investment. Ally is the last big company to have a government investment through the 2008 Troubled Asset Relief Program. [[TARP)

Oh what a tangled web was pulled over on people
-- sort of like a jersey over the face in a hockey fight while blows are delivered to the blind guy

[nain rouge]

You will also have to learn to do without modern conveniences like remote starters, heated and cooled seats, bluetooth, voice recognition controls, streaming audio from your phone, in-car internet connections, DVD players, telematics systems, and the like. All of those things cost a great deal of money.

And all are repair costs waiting to happen. I believe the demand for computerized cars is almost completely fabricated by the auto industry. They try ram it all down are throats so they can upcharge us more. Don't get me wrong, people would want all that junk if the tech was dirt cheap, but it isn't. When I hear "automatic lane correction", I just imagine something I'll have to fix in 5 years when it goes haywire. And they'll add all this crud but still give you horrible breaks.

[Cincinnati_Kid]

And all are repair costs waiting to happen. I believe the demand for computerized cars is almost completely fabricated by the auto industry. They try ram it all down are throats so they can upcharge us more. Don't get me wrong, people would want all that junk if the tech was dirt cheap, but it isn't. When I hear "automatic lane correction", I just imagine something I'll have to fix in 5 years when it goes haywire. And they'll add all this crud but still give you horrible breaks.

So true. Nothing more than a money grab by the auto companies, to pay up the gazhoo for more auto repairs. That's why I have a affinity for older cars, that you can work on and fix yourself.