Banks may have a subprime auto loan problem

CNBC ^ | 22 June 2016 | Tae Kim

[When do we get liberated?]

To use round #s lets say a dealer goes to auction and buys a car for 8000 dollars. He runs it through service dept and passes inspection with it, costing him 1000 dollars so he owns this car for 9000 dollars.
He puts it on the lot for 12,999. A customer comes in with 2000 down and he has a 500 beacon score and a repo last year. Credit apps burst into flames when he signs his name so going to the Credit union for their 4.99 rate isnt an option.
He haggles the price down to 12000. Adding in taxes and tags the tab is 12,800. The dealer pulls his credit and enters the vehicle info into our system. Simply put, the computer sets up an acceptable deal structure. Lets say in this case the fee is 1500 for this deal. The dealer knows if he contracts this customer at this structure, he will get a check for 9300 (10,800 Amount Financed minus 1500 fee) Since he owns the car for 9000 and we are giving him 9300 plus the 2000 he got down from the customer, he has a 2300 profit minus sales tax and tags.
The customer puts down 2000 cash and walks out of the dealership with a car and a contract to finance 10,800 for 42 months at 29.99%
We paid 9300 to the dealer and we now own a contract for 10800 at 29% APR for 42 months. So maybe we make 5000 profit 3.5 years from now when he pays us everything, or maybe this crackhead loses his job, drops his insurance and whacks the car into a telephone pole while drunk one night and we sell a totaled wreck at auction for 800 bucks minus transport and storage costs.