Agreed. I've seen a few downturns in my time and lending gets easy(er) and (what many consider) reckless before a bust. Then the industry tightens up and before too long they're back at it. Wash, rinse, repeat. But I don't think we've ever seen a default rate as high as it is now, in fact I believe it's at a historical high... that can only mean it's gonna hurt more when the current expansion ends... and it will end, you can count on it
Originally Posted by fdcg27
No, I think I have a pretty good grasp of the bigger picture. Marginal borrowers agree to insanely high APRs because that's the only way they can get financed in a new car. Lenders have dollar signs in their eyes but fail to consider what will happen when the next economic contraction comes. All of a sudden, those high-profit marginal borrowers lose their jobs and stop making their car payments, focusing their unemployment benefits upon paying for food and housing. The value of the collateral also takes an instant added hit since the market for repo cars shrivels as the availability of credit and the willingness of buyers to incur debt dries up. This has happened in every serious recession in my lifetime and yours. It happened only ten years ago. There is nothing new under the sun and the current easy credit environment is nothing more than what one can observe as happening late in every economic expansion. Any bailouts will benefit the lenders, since saving the banking system will be seen as vital to continued economic survival, as it probably is.
Originally Posted by Wolf359
I think you miss the big picture. What's the interest rate the lender is charging again? If there are 10 people like that out there doing the same thing and the lender knows that 2 of them will default, but charges the other 8 a high enough interest rate so that they're covered when the two do go under, does that really make them the moron? They're taking on a risk that the higher interest rate will make up for eventual losses. If they've done their business models correctly, they will still make money when people default. Their model probably calls for a certain amount. Where they get in trouble is when too many default. But that's the risk with any business, they go under or get in trouble when the markets don't go according to their business places. Look at WeWork, they were trying for a high valuation, but the markets said otherwise.
Originally Posted by fdcg27
Tell us what you really think, dkryan. LOL! I guess I have to ask who's the greater fool here. The buyer, who clearly does a good dumb blond imitation, or the lender who lends nearly double bucks on the piece? If the buyer runs into any financial difficulties, the lender is then stuck with collateral that won't bring more than 30% of the amount loaned at auction. Who is the moron here?
Originally Posted by dkryan
The buyer, John Shricker, is a total MORON He rolled one loan into another at least three times simply because he could afford the payment. As mentioned previously, no one forced him to buy four cars in two years. The sad thing is a short article on MarketWatch.com appearing online this afternoon blamed "rising car prices" for his $45,000 loan on a $27,000 Jeep. We should pity his victimization. NOT!