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GM wants more subprime buyers; will lender agree?
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What a mess.
And why in heck is there absolutely no mention of Cerberus Capital and their part in all of this?? It was Cerberus who took GMAC down the bad mortgage business path after they bought them from GM.
And why in heck is there absolutely no mention of Cerberus Capital and their part in all of this?? It was Cerberus who took GMAC down the bad mortgage business path after they bought them from GM.
NO COMMENT.
If the dead can vote, why can't they buy cars?
So GM wants cash poor people to buy their cars ?
I remember this when trying to buy an Equinox. I had a 780 Credit Score, but they wouldn't give me the loan due to a high roll over(3k rollover) on an 06 Equinox. They didn't want to go through a third party(BoA, Chase etc) because they wouldn't give a good interest rate on roll over loans.
subprime loans in themselves aren't bad. They only turn bad when the risk level of the loans are hidden from the end buyer of the loan. Where the end buyer is the one who buys part of the debt and receives payment from the person that took the loan out.
I guess what I am trying to say it wasn't the subprime loans that got us in trouble. It was the subprime loans being sold off as low risk investment. This in return increased the supply of money to subprime loans which in return allowed them to have a lower interest rate. This in return makes them more afford able to people that fit in that category so more people get them. Now when the risk is know their is a smaller supply of money to make these loans. So the interest rates on these loans go up. This means that these subprime loans are expensive for a person to get and return fewer people get them to start with.
I guess what I am trying to say it wasn't the subprime loans that got us in trouble. It was the subprime loans being sold off as low risk investment. This in return increased the supply of money to subprime loans which in return allowed them to have a lower interest rate. This in return makes them more afford able to people that fit in that category so more people get them. Now when the risk is know their is a smaller supply of money to make these loans. So the interest rates on these loans go up. This means that these subprime loans are expensive for a person to get and return fewer people get them to start with.
If a company wants to assume the risk and loan money on their own cars to bad credit risks, thats on thier head. But GM already has shown it has the ability to make its problem, our problem. That little switcharoo with Government loans and claiming they paid us all back, when all they did was take another loan to pay the first loan under another name. Apparently people cant be trusted to act responsible so why should a car company, with the reputation that GM already has, is anybody surprised.
Originally Posted By: ZZman
Sure, lets quickly fall into the same trap we were in a little while ago.
Greed.
Wow, just wow!
It's only been a year or so since the economic disaster with subprime loans and they are going to dole these out to yet more irresponsible folks.
Now what do they say when you repeat the same action over and over again and expect a DIFFERENT result....? Insanity!
Sure, lets quickly fall into the same trap we were in a little while ago.
Greed.
Wow, just wow!
It's only been a year or so since the economic disaster with subprime loans and they are going to dole these out to yet more irresponsible folks.
Now what do they say when you repeat the same action over and over again and expect a DIFFERENT result....? Insanity!
Originally Posted By: Panzerman
If a company wants to assume the risk and loan money on their own cars to bad credit risks, thats on thier head. But GM already has shown it has the ability to make its problem, our problem. That little switcharoo with Government loans and claiming they paid us all back, when all they did was take another loan to pay the first loan under another name. Apparently people cant be trusted to act responsible so why should a car company, with the reputation that GM already has, is anybody surprised.
Well said, especially about GM making there problem our problem.
No more GM's for me.
If a company wants to assume the risk and loan money on their own cars to bad credit risks, thats on thier head. But GM already has shown it has the ability to make its problem, our problem. That little switcharoo with Government loans and claiming they paid us all back, when all they did was take another loan to pay the first loan under another name. Apparently people cant be trusted to act responsible so why should a car company, with the reputation that GM already has, is anybody surprised.
Well said, especially about GM making there problem our problem.
No more GM's for me.
When I bought my first new car in 2001, I was technically a "subprime" customer. I was 20 and had a FICO score of less than 640, mainly because I hadn't built my credit up.
If I were looking to buy in today's market, I guess I could immediatly cross GM and Chrysler off my list, since I'd never be able to find financing. That's not fair to me, nor is it fair to GM or Chrysler considering I could walk into a Honda dealer and get financed (along with another 20% of Honda's customers).
Was I an "irresponsible" customer? Considering I made every payment on time, paid the loan off early, and am now sitting with golden credit, I'd say no.
I'm all for proper lending, but there is a difference between fair lending and simply not offering financing to 40% of the population.
If I were looking to buy in today's market, I guess I could immediatly cross GM and Chrysler off my list, since I'd never be able to find financing. That's not fair to me, nor is it fair to GM or Chrysler considering I could walk into a Honda dealer and get financed (along with another 20% of Honda's customers).
Was I an "irresponsible" customer? Considering I made every payment on time, paid the loan off early, and am now sitting with golden credit, I'd say no.
I'm all for proper lending, but there is a difference between fair lending and simply not offering financing to 40% of the population.
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That little switcharoo with Government loans and claiming they paid us all back, when all they did was take another loan to pay the first loan under another name. Apparently people cant be trusted to act responsible so why should a car company, with the reputation that GM already has, is anybody surprised.
Funny, what some say is irresponsible, others say is smart business. As an investor, would you rather have GM paying big dollars on a loan or have them eliminate that high-interest loan using a debt-to-equity swap?
You know what a debt to equity swap is similar to in the consumer world? A home mortgage refinancing. Have you ever refinanced a home? I have. I used the equity in my house to get rid of a very high interest variable rate loan. If done right (not taking too much equity from the home), it's a smart decision that can save lots of money.
Was is smart for GM to take out an ad touting that they have paid off their loans? Probably not, but a lot of that is because people don't understand how finances really work. Was is smart for GM to align it's finances to limit it's exposure to high interest loans? Absolutly!
That little switcharoo with Government loans and claiming they paid us all back, when all they did was take another loan to pay the first loan under another name. Apparently people cant be trusted to act responsible so why should a car company, with the reputation that GM already has, is anybody surprised.
Funny, what some say is irresponsible, others say is smart business. As an investor, would you rather have GM paying big dollars on a loan or have them eliminate that high-interest loan using a debt-to-equity swap?
You know what a debt to equity swap is similar to in the consumer world? A home mortgage refinancing. Have you ever refinanced a home? I have. I used the equity in my house to get rid of a very high interest variable rate loan. If done right (not taking too much equity from the home), it's a smart decision that can save lots of money.
Was is smart for GM to take out an ad touting that they have paid off their loans? Probably not, but a lot of that is because people don't understand how finances really work. Was is smart for GM to align it's finances to limit it's exposure to high interest loans? Absolutly!
Originally Posted By: mechanicx
Good points. Also the article stated that Honda written 20% of its loans to subprime borrowers while GM only had 1%. It seems GM could reasonable write a few more subprime loans.
Sounds like the dead beats go to Honda.
If I was GM I would try to wean myself away from the deadbeats, they are customers you dont want!
Good points. Also the article stated that Honda written 20% of its loans to subprime borrowers while GM only had 1%. It seems GM could reasonable write a few more subprime loans.
Sounds like the dead beats go to Honda.
If I was GM I would try to wean myself away from the deadbeats, they are customers you dont want!
The customer you want is the almost-deadbeat who manages to pay his bills, is one paycheck away from ruin, and preferably one who makes a couple late payments so they incur punitive fees and rate hikes.
They should allow a bit of subprime for 6-12 months to move cars, then close that loophole. Money is always harder to get in a recession. The subprime buyers will trade the cars in on something else in a few years, roll the old loan into another, and it won't be GM's problem anymore.
There are a lot of falling apart cars on the roads, and fools who trade them instead of paying repair bills. The patched used cars trickle down the market. This process has been disrupted-- used cars very expensive-- and if a subprime car gets repo'd the lender should at least get most of their money back, or more then they usually would have.
They should allow a bit of subprime for 6-12 months to move cars, then close that loophole. Money is always harder to get in a recession. The subprime buyers will trade the cars in on something else in a few years, roll the old loan into another, and it won't be GM's problem anymore.
There are a lot of falling apart cars on the roads, and fools who trade them instead of paying repair bills. The patched used cars trickle down the market. This process has been disrupted-- used cars very expensive-- and if a subprime car gets repo'd the lender should at least get most of their money back, or more then they usually would have.
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