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Auto Industries Subprime Problem

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posted on Feb, 3 2018 @ 11:37 PM
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Great breakdown of what's going on with the auto industry and subprime round 2.




Apparently this video was produced by...

Cambridge House



At Cambridge House International, we believe in two simple philosophies: ideas are better when shared, and people are better when connected. For the past 25 years we have built on these ideals, producing flagship, must-attend events and providing industries with the platform for networking, education and investment discovery. We operate in several unique industries and currently produce North America’s largest resource conferences and Canada’s largest technology investment conference. Our goal is simply connecting companies with capital.


Hmm, so does that mean this guy is pitching potential investors??? That would be very interesting wouldn't it?

Bloomberg




“As used-car values drop a bit and delinquencies and roll rates begin to increase, the subprime sector will show significant underperformance and lack of decent liquidity,” said Don McConnell, senior portfolio manager at Bank of Montreal’s BMO Global Asset Management in Chicago, who helps manage $15 billion of taxable bonds. He’s reinvesting cash from maturing notes elsewhere.


I wonder, this guy is moving out of the dollar and.... I don't know... buying gold or real estate or something of true value to ride out the dollar collapse and buy back into the dollar when it bottoms out.




posted on Feb, 4 2018 @ 12:01 AM
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Yeah, the subprime lending in auto industry is out of control.

The problem is that is the only way they can get people into cars. Kind of like what happened with housing. When all the good credit people have already bought, the only way to continue to grow is to start loosening underwriting standard to get more customers. So they start playing with the amortization periods... instead of a car loan being 3, 4, or 5 years... they start pushing 72 and 84 month loans to lower the monthly payment.

It is hard for me to feel any sympathy though. The American consumer is stupid. This is just a consequence of people wanting to drive nicer cars than they can really afford.

Cars aren't like housing though. Cars can be repossessed easily. The underwater loans can be rolled over into a new loan. I could be wrong, but I don't see car loans causing the same kind of issues that the housing market did.



posted on Feb, 4 2018 @ 12:06 AM
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a reply to: Edumakated

welp, if your savvy then there is an opportunity to get into the market coming right?



posted on Feb, 4 2018 @ 09:51 AM
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a reply to: Edumakated

Cars can be repoed, but when that person no longer has transportation to get to work, what's going to happen?



posted on Feb, 4 2018 @ 09:53 AM
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originally posted by: Aazadan
Cars can be repoed, but when that person no longer has transportation to get to work, what's going to happen?


What's the difference? If their car is being repossessed then they aren't paying the note anyway.



posted on Feb, 4 2018 @ 10:03 AM
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originally posted by: AugustusMasonicus

originally posted by: Aazadan
Cars can be repoed, but when that person no longer has transportation to get to work, what's going to happen?


What's the difference? If their car is being repossessed then they aren't paying the note anyway.


But presumably their paychecks are going towards paying rent/mortgages, groceries, and anything else. No transportation to work, means no work.



posted on Feb, 4 2018 @ 10:05 AM
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originally posted by: Aazadan
But presumably their paychecks are going towards paying rent/mortgages, groceries, and anything else. No transportation to work, means no work.


Oh well, don't be an idiot and over extend yourself.



posted on Feb, 4 2018 @ 10:46 AM
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originally posted by: AugustusMasonicus
Oh well, don't be an idiot and over extend yourself.


It's easy to say that, but many people have made poor financial decisions. If landlords suddenly stop getting rent and mortgage payments, what happens to their properties? What happens to the economy when so many people stop having transportation to their shops to buy things?

We could have prevented it, but that time has passed. Instead, this is the potential outcome we're looking at. It's not just the unemployed, it's all the businesses that will face a decrease in customers, which leads to fewer jobs, and even more unemployment.



posted on Feb, 4 2018 @ 11:22 AM
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originally posted by: Aazadan
It's easy to say that, but many people have made poor financial decisions. If landlords suddenly stop getting rent and mortgage payments, what happens to their properties?


Why is that the automotive companies finance department's concern? Should they just let someone float on their payment so someone else can get paid? Kind of a stupid business practice, no?



posted on Feb, 4 2018 @ 11:33 AM
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originally posted by: AugustusMasonicus

originally posted by: Aazadan
It's easy to say that, but many people have made poor financial decisions. If landlords suddenly stop getting rent and mortgage payments, what happens to their properties?


Why is that the automotive companies finance department's concern? Should they just let someone float on their payment so someone else can get paid? Kind of a stupid business practice, no?



No. But actions have consequences. Why should it suddenly be a small business owners concern, or a landlords concern, or an employers concern that the automotive companies were making bad loans? The answer is that it shouldn't be, but because it's such a widespread problem, it's about to be.
edit on 4-2-2018 by Aazadan because: (no reason given)



posted on Feb, 4 2018 @ 11:35 AM
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originally posted by: Aazadan
Why should it suddenly be a small business owners concern, or a landlords concern, or an employers concern that the automotive companies were making bad loans?


If you're renting to someone with poor credit then it's your own fault as well.



posted on Feb, 4 2018 @ 12:00 PM
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a reply to: Aazadan

Yes but the answer is true,don't live beyond your means,won't find yourself in such situations



posted on Feb, 4 2018 @ 12:08 PM
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This is why we're always very careful when we go to get a new car. We examine our budget carefully and don't get more car than we can comfortably afford. We also balance the likely lifetime of the car against the length of any loan we might think about taking out for it.

And we always pay down as much as we can at the outset.

There are too many people whose eyes are too big for their bank accounts.



posted on Feb, 4 2018 @ 12:09 PM
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They've gone passed stupid in the automotive industry, they have to . As i see it, the auto industry as we knew it died back 2008. What we have now is being kept alive by government contracts (thats how the popo got those charges in area for example) and those that legally have a pulse. And also those shiny new car leases, they can float the books like a mofo with a car lease.

Anyone see those dealer car lots? Sure are a lot of cars. More than usual. More than usual if everything was a-okay.

Just imagine these loans if the Fed raises rates.

Bwahahaha, blink Fed, blink!

But what do I know, I'm just someone on the internet.
edit on 4-2-2018 by cenpuppie because: (no reason given)



posted on Feb, 4 2018 @ 12:17 PM
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originally posted by: Aazadan

originally posted by: AugustusMasonicus
Oh well, don't be an idiot and over extend yourself.


It's easy to say that, but many people have made poor financial decisions. If landlords suddenly stop getting rent and mortgage payments, what happens to their properties? What happens to the economy when so many people stop having transportation to their shops to buy things?

We could have prevented it, but that time has passed. Instead, this is the potential outcome we're looking at. It's not just the unemployed, it's all the businesses that will face a decrease in customers, which leads to fewer jobs, and even more unemployment.


Financial illiteracy is one of the biggest problems America faces. Far too many people can't stop over extending themselves buying useless sh*t they don't need. I can't tell you how many times I drive by crappy apartments and see expensive Dodge Chargers and other cars parked out front. Some of these people literally have car notes larger than their rent payments.

The American consumer loves to spend money they don't have to impress people they don't know....



posted on Feb, 4 2018 @ 12:21 PM
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a reply to: Edumakated

Yep.

I always say that the one vanity purchase I would like to make if I ever won the lottery is to go around to all the car lots and test drive a bunch of cars over the course of a couple days; then I'd sit down with my husband over a gourmet meal at a fancy restaurant and go over all our results and buy two cars/SUVs cash off the lot. Just once, just because we could without having to be constrained by budget.



posted on Feb, 4 2018 @ 12:48 PM
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a reply to: Edumakated

I see plenty of that as well. What I've really taken notice of though, is the used car businesses that sell cars with no money down and no credit check. Sometimes the used cars they're selling are even this years models. I swear I see a new business doing this go up every single month. If I had to give a percentage it wouldn't surprise me at all to learn that 80% of cars on the road in this area of the country were funded through subprime loans.



posted on Feb, 4 2018 @ 12:49 PM
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a reply to: ketsuko

Cars should be purchased in cash anyways. Taking out a loan for a depreciating asset is a bad idea.

If you can't afford cash for a car... well, that quickly gets you to the frame of mind that gets people trapped in subprime loans.



posted on Feb, 4 2018 @ 01:02 PM
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a reply to: Aazadan

We are a commuter family. Any car we buy isn't going to be an "asset" by the time we get around to deciding it needs replacing, loan or no. So the idea of depreciating asset is more or less a moot point. The only question left is whether or not we are buying a make and model that is of enough quality to last long-term, and I am talking more than the average 60 month loan term, with minimal maintenance and repair unless you get unlucky enough to get a lemon.

That's where the exhaustive research comes in, and we never buy new.



posted on Feb, 4 2018 @ 02:07 PM
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originally posted by: Aazadan
a reply to: ketsuko

Cars should be purchased in cash anyways. Taking out a loan for a depreciating asset is a bad idea.

If you can't afford cash for a car... well, that quickly gets you to the frame of mind that gets people trapped in subprime loans.


not necessarily, especially in a low rate environment. I was going to pay cash for my current car, but financed instead. I got 60 mos with 0% interest. Yes, 0% interest. My cash is earning much more than zero percent, so I am better off keeping my money and taking the loan.

There is nothing wrong with leverage or debt. It just needs to be managed properly. Taking on debt make sense when you can get a higher return somewhere else or if it allows you to keep cash on hand




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