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And what is a typical repo car worth to the lender? Certainly not the loan value in most instances, and often it's a total write off.
No, it's never a total write off. Worst case, it's towed to the auto auction.
The true bottom feeders are the buy here-pay here lots. They buy the auction cars nobody else wants, clean them up, and sell them at an enormous mark-up to people with a trashed credit rating. They put an ignition disabler and GPS tracker on the car. You miss a payment? The car is disabled. You still don't pay? The tow truck is dispatched. You're getting 18% interest on a $5,000 car you bought at auction for $2,000. Who cares if 1/3 of them get towed back to be resold? There are plenty more poor people lined up to buy the car.
No, it's never a total write off. Worst case, it's towed to the auto auction.
The true bottom feeders are the buy here-pay here lots. They buy the auction cars nobody else wants, clean them up, and sell them at an enormous mark-up to people with a trashed credit rating. They put an ignition disabler and GPS tracker on the car. You miss a payment? The car is disabled. You still don't pay? The tow truck is dispatched. You're getting 18% interest on a $5,000 car you bought at auction for $2,000. Who cares if 1/3 of them get towed back to be resold? There are plenty more poor people lined up to buy the car.
Bad credit? No credit? No problem! No money down!!!!!! No money down!!!!
I just returned from driving the side streets in a solidly lower working class neighborhood in Philadelphia. Not middle class, not even the lower end of middle, but lower class. I know these neighborhoods well, know the typical jobs held by the residents, and I know their culture. I can differentiate between the above mentioned strata in Philadelphia.
There were at least two new 60k plus luxury cars parked per block (Audi Q7s, a few Mercedes SUVs, a couple of Volvo XC90s, etc), and I was frequently behind them as well. I faced a Mercedes AMG at a stop sign with small woman driving it that, let's just say, didn't have the air of a six figure income earner.
Upon returning home I felt a little bit like "Mark Baum's" team in the film The Big Short as they listened slack jawed at the prospect of strippers owning five homes. These streets were never filled with such cars before.
I'm not saying that I have the economic acuity of the guys portrayed in that movie, just that the parallel was there between what they saw and what I just did. I'm also not claiming to be the only one to notice the possibility of such a bubble, as the possibility has been in the press. I'm merely here to report.
You can get a 5 year old Q7 for $18k or less...Same with an XC90, actually those are about $5k less. No idea about the Mercedes but I suspect it's pretty close.
Priced a Camry lately? They are more. And depreciate much slower.
Just because someone has a luxury car doesn't mean they purchased it new.
The bigger issue is gas prices, if they go back to $4/gal you'll see the automaker's profit fall off a cliff and a flood of used SUVs hit the market.
And what about the other side of the balance sheet?
It's purchased "stuff" that's depreciating in value while the interest vig on that debt continues to gnaw. Exponential is exponential, but if you zoom in real close to the graph and squint, there's hardly any changes at all...
I no longer work in the automotive industry but this scenario has not missed my observation. Loan terms are too long. Vehicles cost too much money (many new pick-up trucks pass the $70K price point!). Wages in most industries have stagnated in comparison to vehicles prices.
Vehicles will fail before the loan terms are complete and will ned to be replaced.
People will be so far 'under water' when they attempt to trade in their current purchase that they will never qualify for a replacement vehicle loan.
I just returned from driving the side streets in a solidly lower working class neighborhood in Philadelphia. Not middle class, not even the lower end of middle, but lower class. I know these neighborhoods well, know the typical jobs held by the residents, and I know their culture. I can differentiate between the above mentioned strata in Philadelphia.
There were at least two new 60k plus luxury cars parked per block (Audi Q7s, a few Mercedes SUVs, a couple of Volvo XC90s, etc), and I was frequently behind them as well. I faced a Mercedes AMG at a stop sign with small woman driving it that, let's just say, didn't have the air of a six figure income earner.
Upon returning home I felt a little bit like "Mark Baum's" team in the film The Big Short as they listened slack jawed at the prospect of strippers owning five homes. These streets were never filled with such cars before.
I'm not saying that I have the economic acuity of the guys portrayed in that movie, just that the parallel was there between what they saw and what I just did. I'm also not claiming to be the only one to notice the possibility of such a bubble, as the possibility has been in the press. I'm merely here to report.
1. Wth is the "air of a six figure income earner," pray tell?
2. You do know that after a couple of years, all the cars you mention absolutely tank in value and can be picked up for like nothing, right? Heck, I can get you in a really low mileage Maserati for $50k right now if you'd like. One that retailed $130k new.
3. As for people making stupid decisions with money they can't really afford to spend...this is nothing new.
I no longer work in the automotive industry but this scenario has not missed my observation. Loan terms are too long. Vehicles cost too much money (many new pick-up trucks pass the $70K price point!). Wages in most industries have stagnated in comparison to vehicles prices.
Vehicles will fail before the loan terms are complete and will ned to be replaced.
People will be so far 'under water' when they attempt to trade in their current purchase that they will never qualify for a replacement vehicle loan.
A basic F150 is $23k these days. A Chevy Colorado is $20k.
The high end trucks are expensive but those are for the GC's that have the money.
You can get a 5 year old Q7 for $18k or less...Same with an XC90, actually those are about $5k less. No idea about the Mercedes but I suspect it's pretty close.
It depends on the mileage and how you're buying it. A base model XC90 with 75k miles might get $13k as a trade. You'd have a tough time buying one at that price unless it has a lot more miles on it. On a lot, they'd want $18k.
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