Posted on 06/24/2016 12:51:34 PM PDT by Lorianne
Negative subprime auto data from CarMax's earnings is bad news for regional banks, according to investment firm Piper Jaffray.
"CarMax is the largest used car dealer in the country, we believe these developments indicate we will continue to see more pressure on used car prices in the coming months," Piper Jaffray's Kevin Barker wrote in a note to clients Tuesday.
He added, "The decline in sales from lower tier borrowers (near-prime to subprime) are a clear signal the market recognizes subprime lending may have been overextended. These developments continue to confirm our thesis that lower used car prices and lower auto sales will pressure earnings/revenue for banks most exposed to the auto sector, in particular" Huntington Bancshares, Wells Fargo and BB&T.
Sometimes a large kettle takes a long time to boil...:)
We can agree to disagree on some of these points, I think.
I am no expert on the subject, but I have read a few books, and as a responsible citizen, tried to educate myself beyond what the general populace knows. I have not listened to one single second of drivel from the media about it, since they are all interested in covering the tracks of their liberal Gods.
I’m glad we don’t have to be contentious about it as I have followed your postings on many subjects over the years, and I find myself in agreement with many of your viewpoints on those things.
I don’t know if that is true. I was saying it more to make a point. If you pressed me for an example, I am not sure I could provide proof of that statement.
What I do know is when I got my first mortgage a few decades back, I got raked over the coals about a missed payment of about forty dollars to a credit card, one that I successfully challenged, but I had to write a damned letter explaining it before they would approve my mortgage!
That really burned me. There have been people a lot less conscientious and responsible than me who probably didn’t have to write a letter like that to get a mortgage approved.
I had to do something similar for my first mortgage in 1993. My health insurance didn’t pay a dermatologist bill, and I never received it. Had to pay it off, and write a letter of explanation.
One of the advantages of managing your money appropriately and not living beyond your means is that when the time comes, you can pay for a car in that fashion, which is really nice.
I am a very pragmatic driver, I want reliability, never been interested in a flashy car, not to say I wouldn’t like to own and drive one, but I am more interested in utility and reliability.
So you know what I mean...it really pissed me off.
But given a choice, I wish we, as a country, had allowed banks to manage their loans like that, rather than just opening them up with nearly no down payment to people who were going to eventually default.
And that is done under the watchful eyes of liberal advocacy, who at the slightest hint, would send picketers outside your bank, and government thugs to look at your books.
It angered me to have to pay for something that should have been paid for by health insurance provided by my former employer. But, if I wanted to be approved, it had to be paid and a letter of explanation had to be written. So, I did. Rates were heading up, I thought I’d never see them that low again, lol. Wrong about that one.
Dealing with the car declined is frustrating, fascinating and befuddling combined and never fails to amaze. Bless their hearts.
I work with Small Businesses that can’t get Traditional Bank loans and help them get the funds they need. The rates or effective rates go from 8% to 95%. It’s insane. I see some Business owners with 4 or 5 of these loans that are stacked on top of each other with the Lenders pulling (ACH) from their bank account daily. I’m amazed that there are so many Business owners that may operate a sound business but have absolutely know clue how to manage their money. I do my best to help them consolidate their debt and get them back on track.
Sadly, many of these guys will take more money from another lender once they feel like things are going smoothly again. They are like addicts.
It’s an extrapolated version of “greater fool theory”, from the stock/bond world...so long as there’s a secondary market to sell subprime loans to with no recourse—a “greater fool”—then why not create more loans that can be sold off to somebody else.
I work in subprime auto finance and the loans simply have a higher APR and fees to compensate for potential losses. If your credit is bruised you will pay a higher rate and a couple hundred in fees. If you have a credit score of 425 and you had a car repo...yesterday, then 2500 in fees and a 29.99 rate may be the best deal you car get. If you finance 7500 on a car with a 12000 book value even with bad credit you will get a decent rate and a low fee. Likewise if you are financing 15000 on the same car with slightly better credit you will pay a slightly higher rate and fee.
We dont operate in a vacuum, there are hundreds of finance companies and banks in this market in addition to dealers that finance the cars themselves. Bad credit high interest loans are generally for less than 10000 and are generally 24 to 48 months.
When a fee is charged what is actually happening is the dealer sells the customer a car and the bottom of the contract says 12000. We buy the loan for 10000, so there is a 2000 fee, but neither the dealer nor the customer actually pays a fee to us.
If that sounds like usery to you, remember finance companies go out of business all the time...
CFPB. The race Nazis of the auto industry.
rlmorel, the point I am making is that a general mortgage last for 30 years. 1977 to 2008 is 31 years.
If the 1977 actions had been the cause, there’s absolutely no way the damage would not have shown up until 2008.
The Clinton administration and others during his term, namely from the Justice Department and other activist entities filed cases to get their liberal judges to bastardize the system.
As that system became more and more bastardized, the more the problems grew. Finally it resulted in what any normal person would expect it too.
Bill Clinton, Barney Frank, many other Democrats and not a few Republicans signed on to programs that were pie in the sky programs that defied the principles of lending.
It was known in the early 2000s that there was a massive problem brewing. Bush actually addressed it verbally a few times. None the less, he didn’t demand Congress do something to ward off the melt-down, and he didn’t take any action to force them to.
He diddled. So while I don’t think this was entirely his fault, his administration stunk up the place by allow this melt-down to occur without putting up a vigorous fight.
Clinton’s justice department, Barney Frank, Liberal judges, community organizers, redevelopment concerns, and a whole lot of Democrats and Republicans took actions to cause this melt down in the late 1990s and early to mid 2000s, or simply allowed it to fester and finally blossom into a full meltdown.
If we blame this on 1977, it implies Carter, Reagan, and the first Bush were as complicit as Clinton and Bush. I don’t agree with that at all.
I absolutely detest Carter, so there’s no reason for me to defend the man. What took place during his administration was not what I would have done. I think it was misguided.
Still, it was the culmination of the Clinton add-ons that cause the problems.
During the Clinton administration they merely tossed out screening for bad minority risk. As for folks like me, White middle class, we still had to play by the rules. And I would add, as we should have. As everyone should have.
I remember cases where they played the race card. They also played the zoning card, denying loans on the basis of red-lining, something that made good sense.
If a certain “zone” (for lack of a better term) had an incredibly high rate of defaulted loans and declining property values, that area should be red-lined.
I would state that part of the reason we pay such massive interest rates today, is that lending institutions had to recover their massive losses. Some people who could obtain credit and paid their payments on time, were forced to pay 14% to 29.9% interest on their credit card accounts.
Once again, they found a way to redistribute wealth.
Many of the needed home foreclosures were avoided in the 2000s, as new loans with lower interest rates were implemented. People who were defaulting could roll things over. It’s my take we’re still awaiting a second massive default on debt.
It won’t surprise me at all, if something big happens before or just after November either. They want to blame everything on Trump.
There is no subprime auto bailout and there never has been. Look up Operation Chokepoint, look up CFPB. The government is no friend of subprime auto.
Well, you belief that these are bundled together to offset risk is the exact mindset that brought the financial collapse in 2007.
To be honest, I have no idea. I haven’t even paid attention to it. But is being painted as a parallel, and that’s all I know about it.
It is hard to get worked up about anything like this even if it is a parallel. We all saw what happened before...nothing. Except a lot of money changed hands.
It was a liberal redistribution plan.
Overall I agree with that.
So you make the money by the interest on the 10K? And the dealer makes the 2K? I’m not sure if I follow you.
Just like with mortgages, if the numbers don't square Obama will shake you down.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.