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Started By
Message
re: The used car market is on the brink of an auto loan collapse
Posted on 7/5/22 at 8:50 am to mule74
Posted on 7/5/22 at 8:50 am to mule74
quote:
I think there will be a flood of cars, boats, ATVs, campers, etc.
Whats interesting is that while everyone agrees prices will have to come down, they are so inflated currently that even if they drop 30-50% it will probably only bring it back down to where it should've been all along absent government payouts and supply chain factors.
At some point though all the vehicles sitting in fields in the midwest waiting for chips are going to be ready to be sold and things are going to get very interesting when you have three years of inventory hit a recessionary domestic market.
How do you price a 2021 F150 thats been sitting in a field for two years?
How does that impact manufacturers 2023 F150 pricing?
If everyone is defaulting on their existing notes who can afford to buy any of them?
Will they even want to if gas is sitting at $6/gallon thanks to government policy forcing things towards electric?
This post was edited on 7/5/22 at 8:52 am
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Posted on 7/5/22 at 11:48 am to thunderbird1100
quote:
Did they break out the 4 square? It doesn't even have interest rate on it, just monthly payment amount. I hate when a place tries to breakout the 4 squares on me (trade in value, price of car buying, down payment, monthly payment).
They try and push people to longer terms to lower the monthly payment and jack up the interest rate.
If you want to see their thought process slip a cog or two, just tell them that, at this point, you don't care how much the payment is. the only important thing right now is the Selling Price of the car.
Posted on 7/5/22 at 12:11 pm to Major Dutch Schaefer
I traded in a 4-year old, 36000 mile Accord with no accidents and me as the only owner a few months ago. I bought it for $33.5k new and traded it in for $27k. Only a 20% dip for a 4 year old car is insane. They sold it within a week so I’m sure they got $29-31k for the resale.
Posted on 7/5/22 at 12:26 pm to Major Dutch Schaefer
WTF is Graham Stephan and what credentials does he have talking about car loan market? Best I can tell, he is a realtor with a YouTube channel. Nothing more.
That being said, I have friends heavy in the used car business and they are very bullish about their industry. So what if used car prices have dropped...interest rates are up. They don't care if repos are up...they like repos...they can sell the same car several times, they make most of their money on the initial sale/down payment than they do off of the monthly payments.
That being said, I have friends heavy in the used car business and they are very bullish about their industry. So what if used car prices have dropped...interest rates are up. They don't care if repos are up...they like repos...they can sell the same car several times, they make most of their money on the initial sale/down payment than they do off of the monthly payments.
Posted on 7/5/22 at 12:50 pm to texn
quote:
WTF is Graham Stephan and what credentials does he have talking about car loan market? Best I can tell, he is a realtor with a YouTube channel. Nothing more.
I've been following him for a few years now and the guy is extremely sharp about anything financial related. He's not just a guy who spent a while in real estate. He's heavy in the market, angel investing, how he bought a Tesla for "$72/month", among other things. Watched most of his videos and the kid is really sharp, knows his stuff.
He's definitely onto something here, you cant expect people to take on these frankly huge car payments that have ballooned so quickly with the economy in recession and layoffs on the horizon to end well. Eventually the used car market is going to go way way down in value. Whether it takes a flood of repos over the next year or two or new car supply finally to catchup.
The car market of loans doesnt have the same kind of protections and checks/balances the mortgage market got after 2007/8. There's plenty of horrible lending going on there.
This post was edited on 7/5/22 at 1:02 pm
Posted on 7/5/22 at 3:31 pm to thunderbird1100
My scenario is I have a 2015 Toyota Tundra paid off. Want a 3/4 ton as my next truck. No way to sell now and wait. Need a daily driver. KBB trade-in value currently is around $21k.
Is it better for me to wait for prices of both my current vehicle to come down and the trade vehicle to come down? Or is it better to buy now?
Logically it seems better to wait. If prices drop 30% (hypothetically), my Tundra's trade-in would be $14,700 and the price of a current $70k truck would be $49,000. Purchase price would be $34,300.
Buying now would mean buying a $70k truck and getting $21k. Purchase price would be $49k.
Am I thinking about that properly?
Is it better for me to wait for prices of both my current vehicle to come down and the trade vehicle to come down? Or is it better to buy now?
Logically it seems better to wait. If prices drop 30% (hypothetically), my Tundra's trade-in would be $14,700 and the price of a current $70k truck would be $49,000. Purchase price would be $34,300.
Buying now would mean buying a $70k truck and getting $21k. Purchase price would be $49k.
Am I thinking about that properly?
Posted on 7/5/22 at 3:42 pm to WhiskeyThrottle
Personally there's no way youd get me in a truck right now. That market is so screwed up.
A few years ago you could get 4,5...10 (thanks RAM) grand off sticker price these things. Now you're lucky yo pay sticker on a number of them with over sticker or a bunch of stupid overpriced accessories being included in for an obnoxious price. Not to mention the destination charges on these have gone up drastically. No one seems to notice this but it gets passed on to you. It's $1800 for an F150 destination charge now.
Buddy of mine bought a 2018 F150 XLT (4WD, supercrew, 6.5' bed, 3.5 TT V6, optioned highly) back in 2017 for like $45k. He sold this truck when he got a work truck for free back in like late 2019/early 2020. He got a new job recently that didnt have a work truck included, the same exact trim with the same options he just purchased a 2022 2 months ago for $56k. He couldnt believe it.
A few years ago you could get 4,5...10 (thanks RAM) grand off sticker price these things. Now you're lucky yo pay sticker on a number of them with over sticker or a bunch of stupid overpriced accessories being included in for an obnoxious price. Not to mention the destination charges on these have gone up drastically. No one seems to notice this but it gets passed on to you. It's $1800 for an F150 destination charge now.
Buddy of mine bought a 2018 F150 XLT (4WD, supercrew, 6.5' bed, 3.5 TT V6, optioned highly) back in 2017 for like $45k. He sold this truck when he got a work truck for free back in like late 2019/early 2020. He got a new job recently that didnt have a work truck included, the same exact trim with the same options he just purchased a 2022 2 months ago for $56k. He couldnt believe it.
This post was edited on 7/5/22 at 3:47 pm
Posted on 7/5/22 at 3:44 pm to mule74
quote:
I think there will be a flood of cars, boats, ATVs, campers, etc.
I’m anticipating this as well.
Posted on 7/5/22 at 3:55 pm to texn
quote:
That being said, I have friends heavy in the used car business and they are very bullish about their industry. So what if used car prices have dropped...interest rates are up. They don't care if repos are up...they like repos...they can sell the same car several times, they make most of their money on the initial sale/down payment than they do off of the monthly payments.
Not every used car is financed from a BHPH lot.
Posted on 7/6/22 at 2:40 am to Major Dutch Schaefer
We rented a Model Y for a week, to see what it was like.
After observing the supercharging clientele at a number of different locations, I'm convinced like 50% of them will be defaulting. Lots of trash over-extended on this brand in particular.
After observing the supercharging clientele at a number of different locations, I'm convinced like 50% of them will be defaulting. Lots of trash over-extended on this brand in particular.
Posted on 7/6/22 at 2:10 pm to molsusports
quote:
A surprising number of BMWs purchased are leases by people who should really be buying economical cars with lower maintenance costs. I would love to see the breakdown of default by make and model. I would think low end luxury cars would be disproportionately represented
I have been looking. You can get a 330i x drive for the same as an accord or Camry. Nuts.
Posted on 7/6/22 at 3:45 pm to Aubie Spr96
quote:
quote: I think there will be a flood of cars, boats, ATVs, campers, etc. I’m anticipating this as well.
I hope so, I’m in the market for a boat, camper, and side by side haha
Posted on 7/6/22 at 3:54 pm to Major Dutch Schaefer
quote:I don't know if I can agree that the underwriting standards are as loose as he says, but even if it's "like how" the housing market collapsed in 2008, it's just so much smaller, so the spillover effects will be much smaller as well.
Just like how the housing market collapsed from the loan crisis in 2008, the same thing is said to be starting to happen in the Auto Loan market.
Everyone knows that the chip shortage will eventually sort itself out and thus the used (and new) markets will have to come back down to a more normalized level.
Props to anyone that was able to sell high, drive a beater and wait for the crash.
Posted on 7/7/22 at 8:15 am to Big Scrub TX
quote:
it's just so much smaller, so the spillover effects will be much smaller as well.
I will both agree and disagree. When we're talking about massive valuation involved in the mortgage-backed securities fiasco in 2007-2008, that hit the banks pretty hard, for sure.
But, far more folks are in hinky, overleveraged auto loans. While it might not hit the banks very hard, it will hit a lot of individuals who were budgeting for inflation levels 2 and 3 years ago when they signed 60 to 72-month notes.
Posted on 7/7/22 at 8:31 am to baobabtiger
quote:
I have been looking. You can get a 330i x drive for the same as an accord or Camry. Nuts.
You sure about that?
LEase special on 330i xdrive on BMW's website is $569/mo with $4644 due at signing for 36 mo. Putting the downpayment with the monthly payment, thats $682/mo ($569 x 35 mo + $4644 due at signing...divided by 36 months). So after 3 years you'll pay $24.5k and wont own the BMW. Your purchase option will be for just over $26k still at that point (or the price of a entry level Accord basically).
Depends on which Accord model we're talking here, but $682/mo is almost $25k after 36 mo, $33k after 48 mo and $41k after 60 months.
So for the $682/mo lease payment on the BMW you can own a base model Accord after about 40 months, a mid trim one after about 46-49 months, or a top trim one after about 58 months.
This post was edited on 7/7/22 at 8:34 am
Posted on 7/7/22 at 8:59 am to thunderbird1100
Anybody know anything about the securitization of auto loans? I watched a Youtube video this morning by a guy named Lucky Lopez who is in the industry in Vegas and has been doing a series on a looming auto loan crisis and he talked a little about it.
Not that an avalanche of car loan defaults will have near the effect toxic mortgage instruments had but there is still $1.8 trillion in outstanding auto loan debt.
Not that an avalanche of car loan defaults will have near the effect toxic mortgage instruments had but there is still $1.8 trillion in outstanding auto loan debt.
Posted on 7/12/22 at 9:19 am to Major Dutch Schaefer
Marko from White Board Finance had a good video on this yesterday
Video
In summary - repos are through the roof right now, talks to a car repo tow guy and knows another. They are beyond busy and usually this is their quiet season. They cant even keep up with the repos coming in to tow.
Talks about how stimulus checks (probably Child tax credit payments as well) helped boost car sales and make things even worse with the shortage in supply of new cars.
Auto loan market has doubled in debt from 2010 ($700B) to $1.42T (2021). 46% of auto loans are currently underwater (which sees nuts to me). Average payment is $712 a month (INSANE).
There's time stamps in the video, but a big time fallout is definitely coming and if you can wait for it (wanting a car), you could really benefit.
Video
In summary - repos are through the roof right now, talks to a car repo tow guy and knows another. They are beyond busy and usually this is their quiet season. They cant even keep up with the repos coming in to tow.
Talks about how stimulus checks (probably Child tax credit payments as well) helped boost car sales and make things even worse with the shortage in supply of new cars.
Auto loan market has doubled in debt from 2010 ($700B) to $1.42T (2021). 46% of auto loans are currently underwater (which sees nuts to me). Average payment is $712 a month (INSANE).
There's time stamps in the video, but a big time fallout is definitely coming and if you can wait for it (wanting a car), you could really benefit.
This post was edited on 7/12/22 at 9:19 am
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