Car Deals: Must Be Subprime, Must Finance Through Chrysler Capital

MishTalk

Reader Brian emailed an ad for huge discounts on cars. The fine print is rather amusing: Must be subprime and must finance through Chrysler Capital.

by Mish

Frequently, when you see an ad “only x available at this price”, there are really none available at that price. They all went to friends of the dealer.

I called about the 2017 Patriot and there were still some left but they were “going fast”.

The ad reads “Primary customer must have a FICO score below 620 and must finance through Chrysler Capital”

I asked what happens if my credit score was above 620. As expected, I could not get that price. For someone with a credit score of 800 the price jumps to $13,485.

I asked what happens if I pay all cash. That price is $13,995.

I asked about prepayment penalties and California does not allow them.

Still, the MSRP is $21,760 and you can get one for $13,995. That is a discount of 35.7% off the MSRP.

I do not know what this model typically sells for, but that seems like a hefty discount. A subprime buyer can pay $11,995. That is a discount of 44.9% off MSRP.

Since there are no prepayment penalties, one could immediately pay it off in theory. In practice, someone with a credit score below 620 is extremely unlikely to be in a position to pay the loan off immediately.

Regardless, feed this data into used car prices and inventory valuations.

Real CIPI Autos vs Overall

Image placeholder title
Image placeholder title

Inflation-adjusted, the first-quarter change in real private inventories at new and used car dealers was +27.2 billion vs a Nonfarm total of +7 billion!

Motor Vehicles and Parts Retail Inventories

Image placeholder title

Motor Vehicle Sales

Image placeholder title

Motor Vehicles and Parts Inventories Seasonally-Adjusted and Unadjusted

Image placeholder title

click on chart for sharper view

For further discussion, please see Bubble in Motor Vehicle Inventories? Precise Normalness!

I struggle with the construct of a huge inventory build, but hey, I am not the BEA or an auto dealer valuing cars on the lot.

Mike “Mish” Shedlock

Comments

Global Economics

FEATURED
COMMUNITY