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Subprime woes are back: This time in used cars
CNBC / The New York Times ^ | July 20, 2014 | Jessica Silver-Greenberg and Michael Corkery

Posted on 07/20/2014 7:19:57 PM PDT by 2ndDivisionVet

Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan.

''I am not sure how I got the loan,'' Mr. Durham, age 60, said.

Mr. Durham's application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn't worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car.

This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers' abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers....

(Excerpt) Read more at cnbc.com ...


TOPICS: Business/Economy; Conspiracy
KEYWORDS: automobiles; automotive; finance; loans; usedcarloan; usedcars
Pretty clear-cut case of fraud. People go to jail for that sort of thing.
1 posted on 07/20/2014 7:19:58 PM PDT by 2ndDivisionVet
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To: 2ndDivisionVet

Used-car salesmen never seem to get caught. Either that, or they persuade the officers trying to arrest them to purchase a vehicle.....


2 posted on 07/20/2014 7:25:15 PM PDT by proxy_user
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To: 2ndDivisionVet

Some of these ‘car dealers’ have a creative business plan.

The down payment covers their car cost. Then they finance the rest. When the customer does not / cannot make payments, they repossess. They get the car back for another round. They do not check credit history because they are in a win/win.

Sometimes the customer knows this will happen, but is willing to pay a premium for a car for a few months until repossessed.


3 posted on 07/20/2014 7:31:07 PM PDT by Scrambler Bob
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To: 2ndDivisionVet

the used car market has been screwed up since 2009, when cash for clunkers destroyed nearly a million cars.


4 posted on 07/20/2014 7:33:51 PM PDT by JohnBrowdie (http://forum.stink-eye.net)
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To: 2ndDivisionVet
Here is a link to a good audio/video that explains our current "Subprime Economy." It is the second one down in the page, by that name:

www.gordontlong.com

5 posted on 07/20/2014 7:34:13 PM PDT by JustTheTruth
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To: 2ndDivisionVet

I am now hearing ads for LEASING “certified” used cars. When will the insanity stop?


6 posted on 07/20/2014 7:34:14 PM PDT by Dr. Sivana ("If you're litigating against nuns, you've probably done something wrong."-Ted Cruz)
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To: Scrambler Bob

I’ve noticed that. Piece of junk old cars for $4-8,000 with $995 down payments or thereabouts. That explains it.


7 posted on 07/20/2014 7:37:13 PM PDT by 2ndDivisionVet (The most dangerous man to any government is the man who is able to think things out for himself.)
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To: JustTheTruth
Try again: Here is a link to a good audio/video that explains our current "Subprime Economy." It is the second one down in the page, by that name: Link At www.gordontlong.com
8 posted on 07/20/2014 7:39:21 PM PDT by JustTheTruth
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To: JohnBrowdie
Yep. That sure started it. I went looking for a five to six year old used car in 2012 as my 1997 model had 210,000 miles on it. What they wanted for used cars was obscene . . . and finance rates of 9% to 12%!

Ended up buying a new car with about the same monthly payment because the finance rate was 3%!

9 posted on 07/20/2014 7:41:43 PM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: 2ndDivisionVet

Does this mean the prices for used cars will drop back down into the “reasonable” range?


10 posted on 07/20/2014 7:42:46 PM PDT by Ellendra ("Laws were most numerous when the Commonwealth was most corrupt." -Tacitus)
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To: 2ndDivisionVet

“This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers....”

He was walking before and now he is walking again. Got to drive for several months with out making a payment. Who’s the victim.


11 posted on 07/20/2014 7:43:10 PM PDT by Lurkina.n.Learnin
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To: 2ndDivisionVet

if he knew his situation why did he even consider taking the loan?

moron.


12 posted on 07/20/2014 7:45:57 PM PDT by Secret Agent Man ( Gone Galt; Not averse to Going Bronson.)
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To: 2ndDivisionVet

Another problem is that of too many overpriced used cars that develop serious problems after 3 or 4 payments. No such thing as a reliable,low-priced,affordable used car any more in most instances.


13 posted on 07/20/2014 7:46:08 PM PDT by oldtech
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To: 2ndDivisionVet

The simple fact is that the Fed has extended the Community Reinvestment Act to loans of any type, effectively making it illegal for banks to deny loans to Eric Holder’s people.


14 posted on 07/20/2014 7:46:25 PM PDT by E. Pluribus Unum ("The man who damns money obtained it dishonorably; the man who respects it earned it." --Ayn Rand)
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To: JohnBrowdie
the used car market has been screwed up since 2009, when cash for clunkers destroyed nearly a million cars.

It also doesn't help that due to a lot of safety/efficiency regulations, new cars are now unaffordable to most people. Naturally, this raises the cost of used vehicles as well. We are spending more on transportation than we used to, but we need it so we take the risks.

New Cars Are Unaffordable Except in One Metro Area

15 posted on 07/20/2014 7:50:18 PM PDT by Vince Ferrer
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To: Secret Agent Man

“if he knew his situation why did he even consider taking the loan?”


That’s how I feel-—the sob stories about those who were “tricked” into buying houses they couldn’t afford also bothered me.

.


16 posted on 07/20/2014 7:51:08 PM PDT by Mears
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To: proxy_user

Used car salesmen have always been at the forefront of creative financing.


17 posted on 07/20/2014 7:53:31 PM PDT by USNBandit (sarcasm engaged at all times)
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To: Mears; Secret Agent Man

Playing devil’s advocate - at one time you could not get a mortgage or loan unless the bank believed you could pay it back. Sure, a shady salesperson could make you a “deal,” but if you didn’t have the credit or income the bank would turn you down flat. People who are honest about their income who get approved for a loan naturally think if the bank thinks they can pay it back, the bank knows best. It really is buyer beware. The bank, through a stringent approval process used to be an extra layer between zealous salespeople and dumb consumers. No more.


18 posted on 07/20/2014 8:03:27 PM PDT by informavoracious (Open your eyes, people!)
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To: USNBandit

I used to be in the used car high risk market. I have served in well respected positions of finance companies and banks serving dealers in sub prime auto finance.

The people we were lending to had no other choices. Today, with few clunkers the average guy can afford, people have very limited options for a vehicle on the secondary market. With the federal government taking over so many of the day to day functions of finance and lending I am surprised banks are in business.

Would you lend a vehicle to somebody with a 600 credit score, poor job history, one or two prior repos, a forclosure? Add a bankruptcy to the mix. There is a reason these folks are high risk.


19 posted on 07/20/2014 8:03:46 PM PDT by Michigan Bowhunter (Patriots eneeeded!)
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To: JohnBrowdie

Bump and amen. Two years ago when I was looking for the truck I now own, many dealers cursed nobama for the cash for clunkers program. They said it will take years for the used market to stabilize again.


20 posted on 07/20/2014 8:12:12 PM PDT by upchuck (Peace in the Middle East? Only after Jesus returns. All else is hot air and violence.)
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To: Dr. Sivana

Actually, that has been around for a long time.

I leased my first nearly new car, a 1990 Audi Coupe Quattro, in 1992, right after grad school. It was a Certified, ex-lease car.

Best car I ever owned. Bought it at the end of the lease and drove it for 200,000 miles.

Now, I go through a car a year and try not to get too attached!


21 posted on 07/20/2014 8:12:54 PM PDT by Bartholomew Roberts
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To: 2ndDivisionVet

Why should it be anyone’s responsibility, other than the buyer’s, to determine if the buyer can afford the purchase (car, house, boat, etc.)?


22 posted on 07/20/2014 8:17:12 PM PDT by Cementjungle
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To: Cementjungle

How are things back in 1966? I miss that year. I was in first grade.


23 posted on 07/20/2014 8:18:21 PM PDT by 2ndDivisionVet (The most dangerous man to any government is the man who is able to think things out for himself.)
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To: Scrambler Bob

“They do not check credit history because they are in a win/win.”

This is called, “buy here, pay here”, here.


24 posted on 07/20/2014 8:19:28 PM PDT by The Antiyuppie ("When small men cast long shadows, then it is very late in the day.")
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To: 2ndDivisionVet

Not sure I get what you mean...


25 posted on 07/20/2014 8:20:14 PM PDT by Cementjungle
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To: Michigan Bowhunter; USNBandit

Are they allowed to look back more than seven years as far as BK, repos, foreclosures, etc..?


26 posted on 07/20/2014 8:20:30 PM PDT by 2ndDivisionVet (The most dangerous man to any government is the man who is able to think things out for himself.)
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To: 2ndDivisionVet

interest rates, for things like gov’t bonds,
are near zero.

the ‘sub-prime thing’ will be with us forever.


27 posted on 07/20/2014 8:23:08 PM PDT by RockyTx
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To: Cementjungle

28 posted on 07/20/2014 8:24:47 PM PDT by 2ndDivisionVet (The most dangerous man to any government is the man who is able to think things out for himself.)
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To: informavoracious

“The bank, through a stringent approval process used to be an extra layer between zealous salespeople and dumb consumers.


I’m aware of that-—I’ve been a homeowner for 53 years.

We had a case that was profiled here in Boston about a woman who earned about $50,000.00 a year,yet she purchased a $400,000.00 home——with practically nothing down and an ARM. That’s sheer stupidity.

.

.


29 posted on 07/20/2014 8:28:56 PM PDT by Mears
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To: 2ndDivisionVet

At age 60, he’s got to be drawing Social Security Disability payments rather than retirement benefits.


30 posted on 07/20/2014 8:34:25 PM PDT by Bob
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To: Lurkina.n.Learnin

Taxpayer-backed student loans are the real crisis... these loans are paying for kids who have no business being in college in the first place can get worthless degrees when they are going to wind up being barristas at starbucks and default on these loans and the Dems will just waive the requirement to ever pay it back. Some leftist college professor makes tenure, and the school builds a new arena and hire more administrators with $200k salaries. It’s a tremendous scam... and You and I pay for it all.

At least with a used car, it can be reposessed and sold to the next “victim” of “predatory” lenders.

Actually, you know what is funny, today I was sorting through papers in a box as I settle into a new home I just closed on. 3 years ago, because I did not own a single credit card, I got a letter from a department store chain saying that my application for credit with them was rejected.

I laughed. Now I have 6 credit cards (that I rarely use), a nice truck I am making payments on, and a 30 year mortgage on a 67 acre farm. FU Kohl’s.


31 posted on 07/20/2014 8:50:49 PM PDT by Rodamala
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To: 2ndDivisionVet

Rusty Old American Dream - David Wilcox

32 posted on 07/20/2014 8:52:19 PM PDT by Liberty Valance (Keep a simple manner for a happy life :o)
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To: Rodamala

LOL. Not a fan of Kohls I take it. You are right about student loans. That is the real predatory lending scam.


33 posted on 07/20/2014 8:58:13 PM PDT by Lurkina.n.Learnin
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To: 2ndDivisionVet

My 82-year-old father-in-law died recently. After blowing his inheritance on women and crazy investments, he was living on Social Security with barely a penny to his name. Nonetheless, a few months before he died, he got an $18K loan to buy a used Cadillac This article suggests how it could have happened.


34 posted on 07/20/2014 9:06:25 PM PDT by AZLiberty (No tag today.)
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To: AZLiberty

“After blowing his inheritance on women and crazy investments, he was living on Social Security——————”

Sorry,this made me laugh.

Good for him.

(I’m an 81 year old woman)

.

.


35 posted on 07/20/2014 9:10:50 PM PDT by Mears
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To: upchuck

The used car market may never stabilize. Today’s plastic cars are built to be thrown away rather than kept and tinkered with. Although I have a newer car, I’m much happier with my 1995 Camry. Parts are cheap on the Internet and any side-of-the-road mechanic can replace them. With the newer car, only an expert can fix it, and every little problem seems to stimulate a $500 repair estimate.

In a few years we’ll stabilize to become Cuba. Only grandpa will own a car because all the kids will have become government-conditioned not to even want one.


36 posted on 07/20/2014 9:15:44 PM PDT by AZLiberty (No tag today.)
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To: Scrambler Bob
When the customer does not / cannot make payments, they repossess.

But it isn't over for the customer.

A friend who got bit at the end of an oil boom and couldn't make payments, took the vehicle back to the dealer and handed them the keys. The vehicle had been driven, but not abused.

He got a bill from the dealership for reposession fees, the cost of 'repairs' to the car (including the installation of options the vehicle had never had), detailing, etc. and the total was just slightly more than he owed on the vehicle in the first place.

Only now, he had no vehicle...

Pay cash, private sale. Caveat emptor.

37 posted on 07/20/2014 9:15:47 PM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: oldtech

Check out vehicle rental outfits. They have to turn over their inventory periodically, and the cars are usually very well maintained.


38 posted on 07/20/2014 9:20:20 PM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: Vince Ferrer

That is the only other ‘boom’ economy in the US (unrelated to oil).


39 posted on 07/20/2014 9:22:38 PM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: 2ndDivisionVet

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans.
****************************************
Fraud? YES ,, the bank was desperate to write the loan ,, so they could fulfill their obligation to a CDO house .. so they ignored , encouraged or altered the credit app themselves to make the loan happen... Who is the Victim? Well it’s you and me if anything we have our retirement in bought a piece of the debt.


40 posted on 07/20/2014 9:29:01 PM PDT by Neidermeyer
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To: Mears

“That’s how I feel-—the sob stories about those who were “tricked” into buying houses they couldn’t afford also bothered me.”

They are like the ones that didn’t know cigarettes could kill them.


41 posted on 07/20/2014 9:36:19 PM PDT by headstamp 2
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To: Mears

If you live in Florida, you may have known him. Women loved his “great hair”.

My wife recently spent a week in Florida cleaning up the mess he left behind. If he’d had an RV, it would have had a bumper sticker saying “I’m spending my kids’ inheritance”. I think he scheduled his death for the week he completely ran out of money.


42 posted on 07/20/2014 10:13:39 PM PDT by AZLiberty (No tag today.)
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To: Mears

and these are the same people who if the bank didn’t give them a loan would claim they were being redlined, or unfairly discriminated against.

commie libtards make it so the bank can’t win. don’t make the loan you’re racist. make the loan and you’ve trapped the poor shmuck b/c you’re racist / hate poor folks. commie mantra is banks always wrong, person always victim.

and if you read my posts i am not a friend of big banks and bailouts / bailins for them with their assinine derivatives schemes.


43 posted on 07/20/2014 11:02:12 PM PDT by Secret Agent Man ( Gone Galt; Not averse to Going Bronson.)
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To: headstamp 2
"They are like the ones that didn’t know cigarettes could kill them."

Are you kiddin' me? When did this happen?


44 posted on 07/21/2014 12:08:31 AM PDT by Liberty Valance (Keep a simple manner for a happy life :o)
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To: AZLiberty

Agreed. I have a 94 Nissan Sentra that just last week, I replaced the alternator. It’s got 220K+ on it.

Gets 26 miles/gallon even for the short trips I almost always drive it on. Between 33-36 on the road.


45 posted on 07/21/2014 12:17:04 AM PDT by djf (OK. Well, now, lemme try to make this clear: If you LIKE your lasagna, you can KEEP your lasagna!)
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To: Rodamala

Taxpayer-backed student loans are the real crisis...

I thought these were only loans that could not be defaulted.
The way I described situation- was that loanee just became economic slave to the govt.


46 posted on 07/21/2014 12:42:58 AM PDT by Nailbiter
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To: 2ndDivisionVet

“I’ve noticed that. Piece of junk old cars for $4-8,000 with $995 down payments or thereabouts. That explains it.”

This is partially due to Cash for Clunkers. It is also impacted by inflation. I have a subscription to Hemmings where the US advertises its old cars. A ‘64 SS that five years ago went for around $5k or maybe $10k if it was special in some way is now $35k. These aren’t even drivers. These are collector cars. But a ‘55 Dodge 4 door that never exceeded $5k for three decades is also in the mid $30’s. I’m not sure it’s the same phenomenon as used car prices or if formerly sub-value special interest cars has been caught up in the used car bubble hype.

A new car by comparison is a great value in comparison at the same $30-35k.


47 posted on 07/21/2014 3:33:57 AM PDT by Gen.Blather
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To: 2ndDivisionVet

I am not sure if they consider something prior to seven years ago but I can tell you they will certainly look at people who have multiple 7’s on their files. A comprehensive history is what I always looked at. Somebody who had a bankruptcy but paid all their car loans and neglected medical bills and credit cards were people who were most likely to pay. People who put cash down were more likely to pay. People who traded in an old rats nest of a car were much less likely to pay as they had no skin in the game. You can look at a persons credit history and make a pretty good determination of their credit worthiness and ability to pay. Sadly, computers take over so much of todays decision making.


48 posted on 07/21/2014 4:15:28 AM PDT by Michigan Bowhunter (Patriots eneeeded!)
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To: 2ndDivisionVet

I recently bought a 11 year Honda Accord (runs like new) with 154,000 miles on it. The price was higher then I thought it should be. I searched and searched but the used car prices are too high (both dealers and private). The dealer said because of my history I was offered a higher interest rate. I put $2,500 down and got a 36 month loan.

My history they referred to is that the last time I bought a car was 1999!! They want someone to basically turn over a new car every few years. Why that would be renting a car.

My credit history was 774 at experian. I figured a low interest rate but it is too high. I will see if I can refinance with another credit union.


49 posted on 07/21/2014 12:05:42 PM PDT by minnesota_bound
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To: 2ndDivisionVet
I see no need to read any more.

The premise of the article is that he's some kind of victim, and that is certainly not the case here.

50 posted on 07/23/2014 5:34:54 AM PDT by gogeo (If you are Tea Party, the Republican Party does not want you.)
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