Used Car Repossession Rates Double for Both Sub-Prime and Prime Borrowers, Indicates Trouble on Main Street

[livingston]

Used Car Repossession Rates Double for Both Sub-Prime and Prime Borrowers, Indicates Trouble on Main Street​

Barrons has an interesting article on an increase in bank auto repossession rates connected to defaults [see here]. Essentially, used car prices have surged significantly and the timeline seems to indicate the temporary covid-19 stimulus spending had a lot to do with the increase in demand.

According to data assembled by CoPilot, used cars are currently priced approximately 10,000 higher than they would be without any pandemic related influence, supply side or demand side. Banks and financial institutions loaned money into the climbing market price. However, the artificially inflated car prices now create a bubble where the liability on the books is significantly higher than the repossessed asset is worth.
A higher rate of auto loans are now defaulting for both sub-prime and prime borrowers (double for both), indicating the former buyers are under financial pressure and can no longer make their car payments. The loan to value ratio was as high as 140% when the banks made the loans, a more traditional or normal ratio is 80%.

The banks have a vested financial interest in limiting the number of repossessed vehicles they allow into the used car auction market in order to keep the book value of the cars as high as possible. Those banks and financial institutions have recently rented more storage space for the vehicles being repossessed.

Used Car Repossession Rates Double for Both Sub-Prime and Prime Borrowers, Indicates Trouble on Main Street - The Last Refuge

Barrons has an interesting article on an increase in bank auto repossession rates connected to defaults [see here]. Essentially, used car prices have surged significantly and the timeline seems to indicate the temporary covid-19 stimulus spending had a lot to do with the increase in demand...

theconservativetreehouse.com

 

[ManualF150]

I figured that. I've been seeing a higher than normal amount of cars on the side of the roads without fuel too. If you can't fuel up your car, then how do you expect to pay for an auto loan?

 

[livingston]

From the comments section posted above
Betsy jones
July 10, 2022 5:54 pm


My husband, now retired, sold high-end vehicles.
The number of people who would try to purchase one with credit scores in the 400s was astounding. And I am including those whose incomes which were well beyond triple digits. Or should I say especially those people in such professions that produced those sort of incomes.
They simply had no grasp of finance or their personal situations whatsoever. But these people, on learning their credit scores were so bad that they’d have to put more $$$ down in order to purchase a vehicle, would depart, go to their bank or credit union, and would be instantly granted whatever they needed.
As he used to tell those in such a situation, many completely upside down with their trade ends because of unscrupulous previous salesmen who knowingly put their customers into that situation, ” I am so sorry to tell you but you’ll need to wrap your arms around your current car and love it, because I regret to tell you there is nothing we can do at the moment”

 

[livingston]

I am seeing many more trucks for sale in yards as one drives down the road

 

[99cummins]

I saw an article the other day (that I can’t find again at the moment) that the average vehicle loan payment in the us is over $600/month. I think many people don’t look at the actual prices of stuff they buy. Just what’s the payment and can I afford it on top of all my other payments.

 

[Bigfoot]

I used to do repos...

I live for the oh shit moments in life.

Anyways...

 

[ManualF150]

I did skip tracing repos for one summer.... um yeah... not worth getting shot over material possessions....... you know... repoing and Non-Consensual Towing...

 

[Podmonkey]

What would these mean for those of us still able to make the payments?

 

[Truebeliever]

I did skip tracing repos for one summer.... um yeah... not worth getting shot over material possessions....... you know... repoing and Non-Consensual Towing...

It’s amazing how much information repo companies now with license plate readers.
It’s a job I definitely turned down .

 

[spat]

It’s amazing how much information repo companies now with license plate readers.
It’s a job I definitely turned down .

It's amazing that those companies manage to find theguys they're looking for without pulling over 1000 completely unrelated people for broken tail lights first too.

 

[diggs223]

I saw an article the other day (that I can’t find again at the moment) that the average vehicle loan payment in the us is over $600/month. I think many people don’t look at the actual prices of stuff they buy. Just what’s the payment and can I afford it on top of all my other payments.

Dealers know that and depend on it . Every time I ever went to a dealer, lease or buy, they only want to talk payment not total cost

 

[livingston]

Dealers know that and depend on it . Every time I ever went to a dealer, lease or buy, they only want to talk payment not total cost

What is the max months you can finance a car?


When you finance, the loan length can range from 24 to 84 months, depending on your particular needs

 

[99cummins]

What is the max months you can finance a car?


When you finance, the loan length can range from 24 to 84 months, depending on your particular needs

Unless the apr is much higher, we always go for the longer term for the loan on our vehicles and payoff early. We treat the lower monthly payment as an emergency buffer. Something happens and we end up a little short on money we can just make the smaller payment temporarily to get by.

 

[dwa12479]

I saw an article the other day (that I can’t find again at the moment) that the average vehicle loan payment in the us is over $600/month. I think many people don’t look at the actual prices of stuff they buy. Just what’s the payment and can I afford it on top of all my other payments.

This is exactly right. When you go to a dealer, they'll ask you what you want to spend a month. And once you tell them, you're cooked. They'll drag out the financing as far as possible to hit that number, and it'll be be just a little above. Way too many people shop by monthly payment instead of vehicle price. Thsts why they end up so upside down in a vehicle after 3 years.

 

[meketrefe]

From the comments section posted above
Betsy jones
July 10, 2022 5:54 pm


My husband, now retired, sold high-end vehicles.
The number of people who would try to purchase one with credit scores in the 400s was astounding. And I am including those whose incomes which were well beyond triple digits. Or should I say especially those people in such professions that produced those sort of incomes.
......

What ia a 400s credit score?
I really have no clue since I don't buy anything with any sort of credit.
I know it is frozen thats all I know.

 

[Uzi]

Are we forgetting something here?

You need to impress the neighbors you don't like and social media "friends" some how. You can't do that with an early 2000's Camry, now can you?

You need to be driving the latest BMW, Mercedes or maybe an oversized lifted truck that will never see off road in its life to do it. I know I can't afford it, but I can lease it and at least I can pretend I can afford it. It's the American way after all. I'm pretty sure all the cool kids are doing it and that's what it's all about living as a grown adult.

 

[diggs223]

What is the max months you can finance a car?


When you finance, the loan length can range from 24 to 84 months, depending on your particular needs

Never had more than 60 month, never gone full term

 

[livingston]

People who have been sitting on the sidelines with cash in hand the past two years will be able to make hay in the coming months.

years we have not seen anything yet

 

[Saltwater60]

This is exactly right. When you go to a dealer, they'll ask you what you want to spend a month. And once you tell them, you're cooked. They'll drag out the financing as far as possible to hit that number, and it'll be be just a little above. Way too many people shop by monthly payment instead of vehicle price. Thsts why they end up so upside down in a vehicle after 3 years.

I shop by both. Used car is 48 month term but must meet my payment plan and new car is 60-63 month and that’s it. Also must meet my term. The salesmen get pretty surprised when I tell them up front for 48 or 60 months at payment xyz and then they come back with the payment I want and a longer term and I tell them he’ll no not happening. Most people must just jump on that.

 

[Saltwater60]

I knew this was coming a long time ago. The price of cars that are 5-7 years old that have 150-200K on them are ridiculous. When shit starts breaking on a 20K car people don’t have the money to do all things these days. Buying food, gas, repairs, and paying the bills just doesn’t work.

 

[MikeM]

I shop by both. Used car is 48 month term but must meet my payment plan and new car is 60-63 month and that’s it. Also must meet my term. The salesmen get pretty surprised when I tell them up front for 48 or 60 months at payment xyz and then they come back with the payment I want and a longer term and I tell them he’ll no not happening. Most people must just jump on that.

I never mention financing until price is set. Same with trade in. Also, as @Saltwater60 said, sometimes its good to take longer term. I taught my son that when he was refinancing his student loans. He wanted a 5 year term and I told him to take 10. 2 months later his car engine cost him over $2000. He was so thankful that he could make the lower payments for a while and not have to make higher interest credit card payments. Btw, he is on track to payoff the loans in just over 6 years. Its gratifying when your kids listen to you and even more so when they acknowledge your wisdom.

 

[Grimscale]

It's amazing that those companies manage to find theguys they're looking for without pulling over 1000 completely unrelated people for broken tail lights first too.

You forget....they weren't LOOKING for the guys until they found a reason to "find" them.

 

[Cavalry]

I don't buy a car unless I can pay in full on day one. I drive old junk mostly and am happy with that, but I do have a year old $70K vehicle in my household.
Its not about being rich, which I am far from. I just take the same amount the payment would be anyway and squirel it away.

 

[spat]

What ia a 400s credit score?
I really have no clue since I don't buy anything with any sort of credit.
I know it is frozen thats all I know.

To have a good job and a credit score in the 400s you basically have to fuck over everyone who ever loaned you money.

 

[repete]

I pay cash, if I don't have the cash then I can't afford it.

 

[BerettaGuy]

When you realize that car dealerships are working for the bank. Here is an excellent explanation of how the Banks and Car Dealerships figured out a way to their hands on all the big fat barley dry stimulus dollars.
So the people that suddenly were pulling down an extra 2K per month would get "extra" credit margin. Car Dealerships and the bank then get the money in down payment and monthly payments.
NOW! These people can't afford to keep paying and they are being repo'ed.
This is just the first ripples of the huge wave that is coming.

 

[spat]

I don't buy a car unless I can pay in full on day one. I drive old junk mostly and am happy with that, but I do have a year old $70K vehicle in my household.
Its not about being rich, which I am far from. I just take the same amount the payment would be anyway and squirel it away.

If you can finance it at a rate that's below inflation, do it, it's free money.

0% Apr for 84 months when inflation is 10% is basicslly the equivalent of a 50% discount on the price.

 

[MikeM]

If you can finance it at a rate that's below inflation, do it, it's free money.

0% Apr for 84 months when inflation is 10% is basicslly the equivalent of a 50% discount on the price.

And faster in the income you earn keeping your money in the bank. As long as its more than the rate you are paying, you are coming out ahead.