U.S. Subprime Auto Loan Losses Reach Highest Level Since the Financial Crisis

REO is incredibly costly and moving a house off the books cannot happen quickly especially in a down market.

Cars are better in that way.

Most people will be upside down in their car loan but there's an international market for cars. It's pretty easy to liquidate a used car and capture some capital in the short term. Try that with a $450,000 McMansion.

Is that true? Home values dropped 50%+ in some areas during the housing crisis. And when you're talking about a several hundred dollar home, that adds up quickly.

Cars have the disadvantage that they depreciate, but if you can repo them quickly enough, the losses can be contained.

And as someone else mentioned, cars are mobile, so if you repo one in California, you can always move it to Washington if it sells faster.

Even 72, 84 months is insane. If you need to finance a car for that long to afford the payments, you need to buy a cheaper car.

Second, yes homes can't move, but the legal process you need to go though to evict, repossess, and resell a house is long and expensive. With a car, a repo guy needs just 5 minutes in a parking lot and the car's off to auction next month. Between automatic license plate readers and GPS trackers (for the absolute bottom tier), nowadays they're quite likely to get their chance well before a delinquent mortgagee would be evicted.

so if you can sell the $31.45 worth of repo'd cars for more than $21.17 (100-78.83), you have broken even. 21.17/31.45 is 67% recovery rate. high, but doable for sure. even more so when you consider loans with 31% default rate probably have loan rates much higher than 15%

Besides, it doesn't matter what the prime interest rate is - the consumer rate is always (prime + markup)%.

In fact, Mazda gave me a $500 incentive to borrow at 0% for 5 years. My GM loan was also 0% (but no incentive). So obviously they aren't making anything loaning me money.

Further, I find it hard to believe there's no or slim profits in the sales. I think I did a pretty good job negotiating. I don't even mind disclosing the numbers.

The Volt had an MSRP of $40,325. I managed a $38,258.25 sales price + $1147.75 tax + $94 tag less $1000 rebate for $38,500 out the door. The invoice on this car is supposedly $38,651.

The CX-9 was a similar situation, with an out the door price below invoice.

Both dealers I purchased from were in fact a bit out of town and had to secure the vehicles from other area dealerships. They knew I wasn't likely to use their service departments (each is almost an hour away), so I doubt they cared about any more than making the sale. The sale alone has to have been profit motivated.

Now, maybe individually they didn't make a lot of money on these sales. But it has to be the case that they are making money on their total sales volume. Maybe they'll take a loss on a sale or two if it puts them above a quota which gets them a huge bonus.

These dealers are obviously costly to operate. They have a lot of real estate and the show rooms are beautiful. They hold a ton of inventory for months at a time. I just can't believe they could exist on the slim margins they claim they make on each sale. I would be shocked if they aren't easily clearing 20% or more on average on sales alone, even on deals like mine.

Made money from buying and selling used cars a long time ago. The business flow died down slowly with the rise of the internet and car estimate sites.

Ultimately people could just go to whatever-site, enter their car model and get an accurate estimate, corrected for year, mileage and maintenance tasks done. There ain't any car bought or sold for 10-20% under or over median value.

This is correct, in my experience. My credit union had a set of data that was supposedly KBB but had totally different info (and lower numbers) than the consumer website. They also capped their auto loans at 120% of that value, to account for dealership markup.

And just like last time, if "too big to fail" institutions start going under, they'll get bailed out again because no politician wants the economy to collapse on their watch.