Sub-prime auto loan bubble
 

http://dealbook.nytimes.com/2014/07/19/in-a-subprime-bubble-for-used-cars-unfit-borrowers-pay-sky-high-rates

(use private browsing to click the link if you hit the paywall) This doesn't bode well for the future.

The dealers love it they make a fortune off it. The whole idea is that the car is repossessed and sold more than once.

the puy here pay here dealers do even better. they install a passed time module in that shuts the car off until a payment is made.

Guy I know has a used car lot and sells a lot to low income/bad credit....he repo's them all the time and doesn't mind because they already paid him some plus he might sell the car again if its not trashed.....if it is trashed, he got his money back anyway at the wholesale level.

I went to help a young lady out in a BMW 3 series that had been shut down by something such as this. I was not able to help her.

If a dealer is selling vehicles to a clientele who have a high rate of non-payment/repossession episodes, is he justified in selling his cars at above-market prices and charging borderline usurious interest rates? Could he stay in business selling these cars to the same clientele if he cleared 10% on the sale? Could the lender continue to offer financing to this same clientele at a competitive rate, suffer losses due to non-payment of debt, and still remain in business?

An automobile insurance company has the latitude to vary its policy premiums based on prior loss experience. Say that you are a 45-year-old married male living in rural Kansas with a clean driving record and no accident history. Your annual premium for your 2010 Chevy Impala is $825 per year. The policy premium is set based upon prior loss experience. The same company is also insuring a 20-year-old unmarried male living in UES Manhattan who is driving a 2013 Porsche 911 Turbo Cabriolet. In the last year he picked up two speeding tickets for doing 95 in a 65. In your opinion, should that same insurance company offer an $825 annual premium to the Porsche owner? Their prior loss experience with this type of policyholder indicates that the likelihood of a six-figure claim in the next three years is about 60%.

Car loans are easy to get, I could walk into a GMC dealer tomorrow and sign and drive for 2% at 60 months, anyone who has their act together will do something similar. The people who go to buy here pay here lots are financial wrecks already.


This are the same 500 FICO score people my uncle used to rent to when he had his crappy apartment building.

Yes.

No.

Are those figures hypothetical, or do you have a data source? I'm curious because $825 for the Impala seems high to me. OTOH, it wouldn't shock me to see the Justin Bieber type paying two grand a month or more.

The figures are hypothetical.

Right, and they didn't get that 500 FICO from meeting most of their previous financial obligations.

Hence no one will give them credit, well cheap credit anyway.

The next stop is Grandma I guess.:D

The only one in the family with an 800 FICO, and she plans to keep it that way...

I get people on my lot all the time hoping I'm a buy here pay here because my prices are much lower. The few times I've done it have all ended in disaster. They quit paying for one reason or another. Never again.

There's so many in town that they've driven all the prices of cheap used cars to ridiculous levels. The market is similar in Missouri, Oklahoma, Dallas too. I have to go far, far away to get cars for a decent price.

The people buying the cars are morons... Eventually the sub-prime dealers will run out of these morons and be in deep trouble. I'm already starting to see it.

There's not much money to be had in car sales anymore... my days in it are certainly numbered.

Good. Sub-prime car dealers losing everything and jumping under a bus would be a boon to society. And to bottomfeeders like yours truly, who like their used cars cheap and un-inflated by competition from dealers who buy them up to sell to unworthy trash.

So...Whatsa gonna hap to:
 

Car Max,
Deal Time,
Etc.,Etc.,
And all the other Big Time used car Regional/National chains?