# Next Financial Crisis Might Be in Your Driveway



## Michael - Cleveland (Jan 1, 2015)

*The Next Financial Crisis Might Be in Your Driveway*
With late payments on the rise, a dealership upsell begins to look dangerous.
Bloomberg by Kyle Stock February 21, 2017

Lured by low interest rates, low gas prices, and a crop of seductive vehicles that are faster, smarter, and more efficient than ever before, American drivers are increasingly riding in style. Don't be fooled by the curb appeal, though-those swanky machines are heavily leveraged.

The country's auto debt hit a record in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion. The combination of new car smell and new credit woes stretches from Subarus in Maine to Teslas in San Francisco.










It's an alarming number, big enough to incite talk of a bubble. In fact, the pile of debt would cover the cost of 43.4 million Ford F-150 pickups, one for every eight or so people in the country.

Another way to look at: Every licensed driver in the U.S., on average, owes about $6,100 in car payments.

But the market for cars is a lot different than that for houses. For one, vehicles are a much more fluid asset-they are far easier to repossess and resell. What's more, car payments tend to be cheaper than mortgages and people tend to use their vehicles a lot, so when it comes time to prioritize bills, the auto loan typically takes precedent over other things.










Indeed, delinquencies on vehicle loans, though rising, are still lower than late payments on student loan debt and credit card balances. So preppers getting ready for global economic collapse shouldn't panic about car payments just yet.

But they should worry-just like executives at the big automakers. Barring a few finance startups, the manufacturers are the ones loaning money to the riskiest buyers. They have more incentive to push a sale and, unlike a bank, make money on both the loan and the product, if all works out right.

Recently, carmakers have been focused on moving SUVs and trucks, which tend to carry higher profit margins than vanilla sedans and cost a little more as well. Lowering credit standards a bit and stretching repayment windows up to six or seven years has helped drive business to record levels, with 17.55 million vehicle sales in all last year.

In the past two years, U.S. drivers with credit scores of less than 620 borrowed $244 billion to buy cars, a tally not matched since 2006 and 2007 when the same strata of buyers rolled off with $254 billion in auto loans.










The problem is that a lot of those drivers have a record of not handling their finances particularly well. Car companies-and their captive finance units-make about half of all car loans these days, but they underwrite three-quarters of the ones going to subprime vehicle buyers. As delinquencies rise, these are the first companies that will feel them. Indeed, the Fed says recent delinquencies are inordinately hitting carmakers, while bank and credit unions have actually seen an improvement in late payment data.

In other words, every time a dealer upsells someone into swanky SUV, they have more in common with the buyer than one might think: both may be paying for it later.


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## Jo3030 (Jan 2, 2016)

This will be the bubble that messes w/ Uber and Lyft.

There has been unprecedented leverage and loans in past 4-5 yrs for autos.


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## Michael - Cleveland (Jan 1, 2015)

DeplorableDonald said:


> I'm going to pour Campbell's Chunky Soup down and get a $250 cleaning fee. #MakeCleaningFeesGreatAgain


Love the hashtag. Good luck getting the $250... they've really cut back on how much they'll pay - even if the car requires detailing.


> What is deemed "confrontational" is VERY subjective...


It is indeed - but the site admin/owner has made the guidelines very clear to the mods.
In general, it's a good idea to avoid turning a discussion about driving, pay, earnings, etc. into political grandstanding, as that is in fact, confrontational.


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## Karl Marx (May 17, 2016)

Michael - Cleveland said:


> *The Next Financial Crisis Might Be in Your Driveway*
> With late payments on the rise, a dealership upsell begins to look dangerous.
> Bloomberg by Kyle Stock February 21, 2017
> 
> ...


I happen to be informed about this issue. A neighbour sold his subprime car and truck financing company to a hedge fund a few years back. Family company that built up a substantial business with used car dealers. Most if not all banks never wanted to operate in this space until 3 years ago. The very interesting thing about this business is everyone needs is a ride to work and most people with poor credit will accept any terms including 29 % interest rates or higher to buy a used vehicle.

This bubble is on 4 wheels. The nasty part is the late night tow operation. The banks and hedge funds simply farm out the horrible side of this biz to tow truck contractors. When this was in the hands of family businesses everyone took turns doing the midnight towing. The sons and daughters of these businesses have since sold out and did very well. Many are still in the midst of building their dream homes. If the they had not sold out so early they would have retired as billionaires rather than multi multi millionaires. I will ask my neighbour who is about to move what he thinks of this article.



TheFixer1 said:


> And don't forget the college debt crisis, college grads graduating and not be able to find a job, everyone is on credit, six out of ten Americans do not have $500 in savings and the majority are working paycheck to paycheck. Under Obama people on government assistance increased by 15 million.


Oh...and online Phoenix University is about to make a come back with the blessing of Betsy Illiterate Devos at the helm. Let the good times roll.


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## Karl Marx (May 17, 2016)

Michael - Cleveland said:


> Apparently you are under the impression that this is the appropriate venue for you to rant and rave about politics and stir up confrontation. I'm afraid you're mistaken. Exchange of ideas is encouraged - confrontation for the sake of confrontation is a waste of everyone's time here - and against the Terms of Service.
> 
> If you want to post something, at least make it factual - not your 'alternative facts'.
> 
> ...


Amazing that the wealthiest nation on the planet can't give its' people universal health care or better yet the politically correct designation, SOCIAL MEDICINE. But you know what the best part is about social medicine? Yup...no paper work, no phone calls to the billing department no deductibles, no co pays, and no looking at itemized invoices that come every several months for years on end. ( My father had a stroke in FL and it was the most bizzare experience we ever had. He was insured, the insurance company was so livid with the hospital than they flew a nurse and doctor from Toronto to Ft. Myers to do hospital break out. Anyways 112,000.00 dollars later the nightmare ended, but the bills only stopped several years ago. One of the last invoices was for a bandage, he had cut himself reading a magazine and a 2 Q Tip's to clean his ears $35.60 in US dollars. Never ever get sick in FL or for that matter anywhere in the continental United States, if you know whats good for you.

God Bless Tommy Douglas and Canadian Social Medicine.

The one good thing about Uber People is that the trolls never stay very long. In fact I am starting to think that the old timers are perhaps some of the most enlightened and informed people I have ever met on the internet. I also consider myself somewhat informed on things happening in communications and transportation. But almost every other day I see events and stories on here that I either missed or failed to realize were important.

Perhaps 20 or 30 years from now this digital record might prove illuminating for students and thinkers.


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## observer (Dec 11, 2014)

I have deleted several posts that were political and edited one.

Please if you want to discuss politics go to a thread on politics. I will be removing members from threads and/or the forum if these instructions are not followed.

There will be no discussion about my decision.

Please be forewarned.


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## Karl Marx (May 17, 2016)

Jo3030 said:


> This will be the bubble that messes w/ Uber and Lyft.
> 
> There has been unprecedented leverage and loans in past 4-5 yrs for autos.


I spoke to an Uber driver at the garage yesterday afternoon, he was fed up with his Sonata's front end performance. It was his 3 rd time rebuilding his front end. Shocks, struts and steering take a terrible beating on Toronto pot hole ridden streets. After repairs and driving full time for the past year and half he figured out he would be better to go back to pizza delivery. He didn't know about Uber People.


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## Jermin8r89 (Mar 10, 2016)

I bought a 2008 ford f150 in pretty good condition with a few things needing work. It had 80k miles on it. The shocks needed some work done. Then needed a new paint job i got it for only $4500. I did research and was careful what i could get. 

Why do u need wifi in ur vehical? Why do u need a big screen in ur car? Im sure if u homeless liveing in ur vehical then why not all the bling and screens. Aome of these vehicals seem better then some apartments. All u need is feidge in bathroom in these new cars


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## flexian (Aug 16, 2016)

Jermin8r89 said:


> Why do u need wifi in ur vehical? Why do u need a big screen in ur car? Im sure if u homeless liveing in ur vehical then why not all the bling and screens. Aome of these vehicals seem better then some apartments. All u need is feidge in bathroom in these new cars


i think these drivers are working 50-60 hrs a week trying to outrun the inevitable fare decreases, 'sleeping rough' seems like it will be on the rise

this will be a big part of the gig economy in the near term, Uber drivers are the canaries in the coal mine


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## observer (Dec 11, 2014)

Karl Marx said:


> I happen to be informed about this issue. A neighbour sold his subprime car and truck financing company to a hedge fund a few years back. Family company that built up a substantial business with used car dealers. Most if not all banks never wanted to operate in this space until 3 years ago. The very interesting thing about this business is everyone needs is a ride to work and most people with poor credit will accept any terms including 29 % interest rates or higher to buy a used vehicle.
> 
> This bubble is on 4 wheels. The nasty part is the late night tow operation. The banks and hedge funds simply farm out the horrible side of this biz to tow truck contractors. When this was in the hands of family businesses everyone took turns doing the midnight towing. The sons and daughters of these businesses have since sold out and did very well. Many are still in the midst of building their dream homes. If the they had not sold out so early they would have retired as billionaires rather than multi multi millionaires. I will ask my neighbour who is about to move what he thinks of this article.
> 
> Oh...and online Phoenix University is about to make a come back with the blessing of Betsy Illiterate Devos at the helm. Let the good times roll.


As a reformed Repoer , I can confirm the sale of Mom n Pop repoers. Most Mom n Pop repoers in bigger cities have been either bought up by corporations aiming to monopolize this type of what used to be small business or forced out of business. Smaller repo businesses will soon exist only in small town America if they exist at all.

As an FYI, many businesses have started in the last twenty or so years whose sole purpose is the monopolization of industries that were at BEST, regional in size . BlockBuster, Autonation, Uber, Waste Management, LKQ, Etc.

The son of one of the founders of LKQ and Waste Management started the roll up of the repo business with a company called Renovo. I surprisingly enough wound up being laid off by the father and hired by the son a few years apart, in completely different industries.

These roll up companies are part of what is destroying the middle class in America.


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## Karl Marx (May 17, 2016)

observer said:


> As a reformed Repoer , I can confirm the sale of Mom n Pop repoers. Most Mom n Pop repoers in bigger cities have been either bought up by corporations aiming to monopolize this type of what used to be small business or forced out of business. Smaller repo businesses will soon exist only in small town America if they exist at all.
> 
> As an FYI, many businesses have started in the last twenty or so years whose sole purpose is the monopolization of industries that were at BEST, regional in size . BlockBuster, Autonation, Uber, Waste Management, LKQ, Etc.
> 
> ...


The new finance vultures, that are still relatively new and growing are online lenders. Capitalism is now in markets thought to be too cumbersome or risky to bother with. Rent to own furniture is a growing market and focused on small rural towns. The poor have always been sub prime victims but the new vultures are the ones that created the 2008 melt down.

Bankers won't ever be happy until they've had your last drop of blood. A modern day Bonnie and Clyde would probably be robbing the food banks and the PayDay Lenders.

Sold a car last year online and I was shocked at the number of people that phoned and asked if I would personally facilitate financing my car for them. Finally sold it to a drywall fellow who had a Saturn with 450,000 Kilometres that I had be a passenger in to return to my mechanics shop. It was the most terrifying car ride I have ever had. As well I was paid in 10 and 20 dollar bills. The bank teller kept looking at me funny while she was counting the money.


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## flexian (Aug 16, 2016)

what is there left in peoples lives to amortize?

i cant think of anything......


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## observer (Dec 11, 2014)

flexian said:


> what is there left in peoples lives to amortize?
> 
> i cant think of anything......


Don't worry, bankers will think of something.


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## Karl Marx (May 17, 2016)

flexian said:


> what is there left in peoples lives to amortize?
> 
> i cant think of anything......


I can....human organs


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## observer (Dec 11, 2014)

Karl Marx said:


> I can....human organs


Social Security.


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## Jermin8r89 (Mar 10, 2016)

Selling pot. Seriously. Colorado is makeing major dough. In 2018 atate of ma will let private cannabis owners sell to who ever


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## TheFixer1 (Jan 29, 2017)

The economic crisis and crash is just around the corner, this is what happens when you keep printing fake monopoly money like drunken sailors, and spending money you don't have. This is the only way to straighten out the house finances, it will be painful but a much needed dose of reality.


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## Michael - Cleveland (Jan 1, 2015)

Karl Marx said:


> Bankers won't ever be happy until they've had your last drop of blood.


Au contraire - bankers will never be 'happy' (ie: satisfied), period. Because there is no 'end' - just last quarter's numbers to beat.


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## flexian (Aug 16, 2016)

aha, here we go:

https://www.bloomberg.com/news/features/2017-03-01/i-m-renting-a-dog



> That wasn't so strange, even if $2,400 was more than she'd intended to spend. (There's a reason pet stores put puppies in the window.) The odd part came a few weeks later, when she and her husband were going over their credit reports and saw a $5,800 charge from a company they'd never heard of.
> 
> The Sabins had bought their new dog, Tucker, with financing offered at the pet store through a company called Wags Lending, which assigned the contract to an Oceanside, California-based firm that collects on consumer debt. But when Dawn tracked down a customer service rep at that firm, Monterey Financial Services Inc., she learned she didn't own the dog after all.


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## Karl Marx (May 17, 2016)

flexian said:


> aha, here we go:
> 
> https://www.bloomberg.com/news/features/2017-03-01/i-m-renting-a-dog


Regular people now getting mixed up in the financial gruel. Thank you for posting.

I was doing my RRSP's at the bank this week, a transaction I knew could be done online. Made the appointment and met the 'advisor' and signed the papers and with my wife present we said we'll put it into GIC, that I know doesn't pay anything. Only locked in for a the short period until 'we can figure out what's going on.'

Only reason we even went to the bank was to have it signed officially because it was a offset transfer. This banker was sure he was going to put us in a Mutual Fund with 2 % fees and of course the banks commission. When he realized he wasn't he got very hostile. My wife who was a banker early on in her career told him we were there only for the stamp and his signature and that we could have easily done the entire transaction online. He gave us a blank stare and quickly finished up with us. What he thought was an easy mark must have more than ruined his morning.

With the advent of FinTech and now "FleeTech" people must become more focused on researching the scams and fine print.

Bankers and Scammers Unite.

"Let's make financial transactions great again."


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