Wave of Repossessions Coming as Subprime Auto Buyers Miss Payments

Mish

Subprime car lenders report a sharp drop in auto loan payments.

In a sign of upcoming trouble, Subprime Car Buyers Miss Loan Payments.

Credit Acceptance Corp., the lender to car buyers with subprime credit scores, warned it’s seeing a sharp drop-off in payments as people shift their financial priorities to get through the coronavirus pandemic.

As unemployment soars, borrowers are putting off payments or “reallocating resources,” Credit Acceptance said in a regulatory filing Monday, explaining that it needs more time to publish a quarterly report. New lending is also slowing as dealerships across the U.S. are forced to shutter their lots, the company said.

 Ally Financial Inc. said on Monday that about 25% of its auto-loan customers have taken advantage of its payment-deferral program.

Forbearance Masks Problems

The filing by Credit Acceptance shows some consumers already can’t keep up. 

Meanwhile, loan applications have plunged as dealers have closed their lots. 

Mish

Comments (34)
No. 1-11
Blurtman
Blurtman

We're talking about homes, for people in California.

magoomba
magoomba

Viable used cars are very scarce now. Most of what is showing up now are ill made turkeys, impossible to maintain. Properly designed cars are not to be found. Folks will keep them until the wheels fall off. The mentality of ignorant easy credit buyers put a lot of short lived bum junk on the road. Most will go to the crusher still unpaid for. I had to find one this month when my $600. cash ugly used Korean wagon finally croaked after 12 years of payment free driving. I finally found a strong old Toyota 5 speed wagon lurking under a despised Pontiac badge for 1800. cash. More than I like to pay, but the only decent thing for 200 miles around. I expect to get at least 120K more miles outta this one.
I understand that most folks are helpless when it comes to driving well and cheap. There will be a whole lot less serf workers driving now. I suppose low wage employers could arrange for some kind of beater van or something to pick them up and take them home, but that would mean you have to schedule them better. Nah, too much trouble. Maybe build some bunks in back.

magoomba
magoomba

Once in a while I do some driving for some business folks. If not a truck, often a leased small car. These are low miles vehicles (under 20K), often new.
I can feel and hear them internally hemorraghing as they struggle under normal driving conditions. Badly designed, ill fit together, it amazes me that people would buy these POS new. I predict a severe used car shortage ahead.

magoomba
magoomba

AWD cars are the worst, they self destruct. yet so many new cars buyers chose them, because they tote the note.

Lively1
Lively1

Was at a local Nissan dealership yesterday getting oil changed in vehicle and it was their first day open in two weeks. So no sales in 2 weeks (this dealership is owned and operated along with 2 to 3 other dealerships in the local market/ so all of them was shut down 2 weeks) and I test drove a couple of vehicles and of coarse the saleman had to run some numbers for me on a new car....What was surprised me was the salesperson talking about the majority of car buyers were coming in with a credit score in the mid to low 400's these days and getting financed.

truthseeker
truthseeker

Mish please stop making me log on again. In all candor I’ll admit that on the weekends an aged bottle of Glenlivet scotch normally takes over and provides me with the necessary leadership that I need for inspiration from the dramatic deep probing questions and answers the world needs from the depths of eternal concepts seeking truth from the seeker!

Six000mileyear
Six000mileyear

My brother worked for Credit Acceptance Corp. 4 years ago when his territory saturated, he change employers. While he worked there, I asked him about their business model. They used their own money to lend and kept the note. I was surprised and asked if he was sure the note was not sold off. He was adamant CAC held onto the note. I asked how CAC was willing to hold onto the note. Because they have computer algorithms that detect under rated subprime borrowers. Enough said.

Bam_Man
Bam_Man

Looks like it will be a very good time to be used-car shopping soon.
My wife is thinking about getting a nice, late-model mid-sized SUV to replace her old (but still reliable) 2007 Highlander.

Stuki
Stuki

Free trade is never a problem. Not even in Cocaine. Freedom never is.

"Free" money, OTOH, is. Specifically because money is not "free." If it was, it would have no value. So, in order to hand "free" money to useless, connected leeches in exchange for nothing of value, the money first have to be stolen, by debasement or otherwise, from someone more useful and competent. Which is the exact opposite of freedom, despite what the Newspeak maintainers want their captive drones to keep falling for.

End the Fed and starve out Wall Street, K street and everything and everyone in any way connected to either, and America will stop hemorrhaging basic competence in no time. No need to turn it into a prison where people are waterboarded for wanting to buy a decent cup of noodles or a competently made cellphone for a decent price. Just end the leeches. All of them. Regardless of what immediate "consequences" the regime sycophantic leeches have been told tie themselves in a knot over may happen as a result. Just end them.

RonJ
RonJ

"Subprime car lenders report a sharp drop in auto loan payments."

As with houses, i doubt it is confined to subprime. People with good credit are also out of a job.

Jdog1
Jdog1

Default is going to be huge going forward I'm afraid. We are finally going to see the consequences of the moral hazard people have been warning about since 2008.

When you begin to reward people for doing the wrong thing, it can get out of hand pretty quickly. People are beginning to believe they do not have to keep their commitments now, and they do not seem concerned with the consequences.

In NY there is "rent strike" movement going on, where people are being asked not to pay their rent, even if they can afford to. I expect this to spread. People are asking to be laid off by their employers so they can be paid more on unemployment.

Debt default causes deflation. When debt is defaulted on, the money if effect simply disappears. Government is trying to offset this to some degree by borrowing money from taxpayers in the future, and giving it to people and business now, but if this default trend continues, the money destruction will overwhelm all the attempts to stem it.


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