Lenders Being HAMMERED on auto loan defaults; Recovering just 51% of unpaid balance of vehicle notes on repossessed vehicles' "Lenders Snatch Back the Piggy Bank After Taking a Hit on Auto Loans"
invite response
2017 May 3, 12:20pm 4,821 views 18 comments
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Shaman
2017 May 3, 1:14pm
Loaning 140% value on a vehicle is a standard practice these days. Is it any wonder that repossessions are way up? Putting people underwater on an asset they can walk away from is not a sound business strategy. It didn't work with housing, and it works even less well with something as fungible as an automobile. There are more of those than people in the USA by a wide margin. Letting an expensive car go back to the dealer and driving a 10 year old beater they bought for cash is pretty good idea a lot of the time.
MAGA
2017 May 3, 1:40pm
My credit union is offering personal loans for people wanting to go on vacation. What!!!!!????
If you do not have to cash to take a vacation, maybe you should stay at home.
Which is why we must overthrow Kim-Jong Un and force those fucking commies to buy automobiles.
Drive or die!
$20,000,000,000,000 debt,default & repossession of America.
These creditors are screwed. America is not worth a pile of fiat.
If you fall asleep in your car,the new owners may have it towed.
Damn, loiterers. lol
NDrLoR
2017 May 3, 3:50pm
My credit union is offering personal loans for people wanting to go on vacation
At least they can't take the vacation away from them and it won't depreciate.
Shaman
2017 May 3, 4:05pm
But you can walk away from your house and let it get repoed and sleep in your car. If your car gets repoed, now where do you sleep? The car is usually the last thing you lose.
I disagree. Cars are a dime a dozen. Homes are far more permanent. For that matter, you can let the car go and take the damned bus or an Uber or the train. Losing the house makes you and your family homeless and is the last choice for anyone with half a brain.
BayArea
2017 May 3, 4:11pm
good, hopefully it will teach the sleazy banks to stops handing out loans like candy.
But the sad truth is that the rest of us, who don't live our lives on credit, will end up picking up the bill for the ones that do, in one way or another.
And what's wrong with purchasing a used car with cash, you credit obsessed assholes.
lostand confused
2017 May 3, 6:21pm
I am increasingly thinking we are due a recession-will it be a mini one or a major one-lets see.
BayArea
2017 May 4, 8:53am
$1.2T in auto debt in the USA, fascinating!
Loan to value of 100%+ on an asset that will ALWAYS depreciate.
It's like the banks are rolling out the red carpet for you to walk away.
As a side note @Patrick , what's the play on the GM holding now?
zzyzzx
2017 May 4, 8:59am
hopefully it will teach the sleazy banks to stops handing out loans like candy.
They never learn! You should know this by now. Duh!
I used to work at a big big banks sub-prime auto loan division. If I were in charge, the people deciding who got the loans would HAVE to work in the collections department for a while FIRST!!!
BayArea
2017 May 5, 5:41am
Effected employees, if they have at least one year seniority, will receive roughly 75 percent of their pay while on leave.
Wait what? lol
This is a "layoff" or is it one of the best things that can ever happen to a factory worker lol.
If I could leave my job and get 75% pay, id do it in an instant.
What a tragic story for those Ford factory workers.
Tenpoundbass
2017 May 5, 7:48am
Who can afford $300 a month for an economy car lease?
Who can afford $600 a month for 7 years for an economy car?
Who can afford $1200 every 3 months for insurance?
NDrLoR
2017 May 5, 9:03am
If I could leave my job and get 75% pay, id do it in an instant.
It's this attitude that is killing the American auto makers. It started with the 67 day strike against GM in 1970 which established the 30 and out policy with full healthcare coverage for life. A 20 year old who started in 1960 could retire at 50 in 1990 and have GM pick up the tab for healthcare for the next 30 years--GM was described in those years as a health insurance company that made autos as a sideline. Employees who hated their jobs hung on to them anyway because of that carrot at the end of 30 years while building the worst cars the company had ever made and running it into eventual bankruptcy.
Strategist
2017 May 5, 9:24am
Effected employees, if they have at least one year seniority, will receive roughly 75 percent of their pay while on leave.
Wait what? lol
This is a "layoff" or is it one of the best things that can ever happen to a factory worker lol.
If I could leave my job and get 75% pay, id do it in an instant.
What a tragic story for those Ford factory workers.
It's the damn unions. This is why American companies can't compete.
BayArea
2017 May 5, 9:30am
If I could leave my job and get 75% pay, id do it in an instant.
It's this attitude that is killing the American auto makers. It started with the 67 day strike against GM in 1970 which established the 30 and out policy with full healthcare coverage for life. A 20 year old who started in 1960 could retire at 50 in 1990 and have GM pick up the tab for healthcare for the next 30 years--GM was described in those years as a health insurance company that made autos as a sideline. Employees who hated their jobs hung on to them anyway because of that carrot at the end of 30 years while building the worst cars the company had ever made and running it into eventual bankruptcy.
My point is that GM laying off people and paying them 75% of their salary creates a fuzzy incentive system for those employees.
If I could leave GM and make 3/4 of my salary, I would. Why? Because the upside of working elsewhere while collecting my 75% from GM is higher than working for GM full time for 100% pay or sitting on the couch at home and collecting 75% pay. GM is a corporation that can do what as it pleases of course, but it's not clear to me why they would agree to such an arrangement. Maybe they don't think the "layoff" will be long term enough? Maybe the work is specialized enough where it would be too pricey to hire and train new? Maybe they are terrified to wake the labor unions? Who knows.
Back in 2011, I was working for a tech company here in the Bay Area that hit tough times and started a one day per week mandatory furlough for 98% of employees. Being in customer account management, I was one of the 2% that was sparred. After 12mo, the company stabilized financially and terminated the furlough program. To my surprise, most of the employees I knew didn't want to get back on the 5 day work week claiming that their quality of life improved dramatically by only working 4 days per week, despite collecting only 80% pay.
BayArea
2017 May 5, 9:31am
It's the damn unions. This is why American companies can't compete.
Yes, it certainly skews the rules of capitalism, with massive chain reactions down the pipeline.
lostand confused
2017 May 6, 3:06pm
The automaker said most of the layoffs will be voluntary. Effected employees, if they have at least one year seniority, will receive roughly 75 percent of their pay while on leave.
How do I get "laid off" like this??
Ceffer
2017 Nov 3, 6:30pm
Lenders Snatch Back the Piggy Bank After Taking a Hit on Auto Loans
April was the fourth consecutive month to see U.S. auto sales underperform compared to 2016, leading many to speculate that the long-awaited slump has finally arrived. New car sales aren’t the only thing slipping, as used vehicle values — diminished by a flood of off-lease stock and new car incentives — is on the same downward trajectory.
At the same time, the country’s biggest auto lenders have taken a look around and do not like what they see. No bank wants to be stuck with a low-value repossessed car, so purse strings are tightening across the United States. Securing that next loan just became harder.
Of course, this is the last thing any automaker wants to hear.
Inventory sitting on dealer lots SKYROCKETING.
Auto loan defaults SKYROCKETING.
USED VEHICLE (even 2 and 3 year old, low mileage ones) PLUMMETING.
Auto factories seeing lines shut down and planned worker layoffs/furloughs SKYROCKETING.
AND IT'S ONLY JUST BEGUN. JUST WAIT UNTIL YOU SEE HOW FAST THESE UGLY TRENDS ACCELERATE AS THE DEBT-SOAKED
CONSUMERS AND NOW RISK-CARRYING LENDERS CUT OFF THE SPIGOT.
http://www.thetruthaboutcars.com/2017/05/banks-snatch-back-piggy-bank-taking-hit-auto-loans/
"According to the Wall Street Journal, growing losses on defaulted auto loans have forced banks to dial back their generosity towards borrowers.
While the trend stands to hit subprime buyers the hardest, even those with good credit scores are starting to feel banks’ newfound caution. Wells Fargo recorded a 29-percent drop in auto loan originations in the past quarter, compared to a year prior. Santander Consumer USA saw a 21-percent drop in originations during the same period.
“It’s been an overheated sector,†Fifth Third Chief Executive Greg Carmichael told WSJ. “The auto business just isn’t as attractive right now.â€
Annualized net losses on auto loans are up, hitting 10 percent late last year before dipping slightly. While the delinquency rate is on the upswing (especially among subprime borrowers), the reduction in used vehicle values plays a major role — banks are only recovering 51 percent of a repossessed car’s unpaid balance, according to S&P Global Ratings, down from 65 percent in 2011.
Fewer people being approved for loans, coupled with a glut of cheap used cars, should make a nervous auto industry even more pensive. The move to curtail auto loans comes as new car inventories soar. It’s a very different picture from the one seen over past several years, when new vehicles sales (and loan approvals) soared in the wake of the recession, though it has also been a long time coming."