Upcoming Car market implosion (car loan, auto, buying, selling)
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I recently watched a Youtube Podcast about the recent Car market explosion. So my title sounds very misleading but the podcasters talked about the very situation that will cause an implosion soon. The main podcaster who sold cars for over 25 years said he's seen this before but what's worse recently is the subprime loans are what's gonna cause this market to implode if people lose their jobs or income.
He talked about the kind of ways people get into cars. Many people who don't have good jobs or income usually have negative equity or are underwater in previous car loans. They then trade in their negative equity for even longer term car loans further increasing their loans and could lead to people defaulting on their loans.
The average folks change cars 36-48 months and used to carry a 36 month loan, now he's seeing people with atleast a 60-80 month loan and will never be able to pay it down if they keep adding more debt.
Which will lead to the eventual day when the car market has a surplus of used cars and tons of repo action as well as many subprime loans defaulting that could lead to a few billion in write downs.
I expect within 3-5 years we'll see a car market implosion.
I'm both a life-long car enthusiast, as well as almost 70 years of age. People have been "getting into" cars that they really can't afford, as long as I've been aware of how much a car costs. What really drove people into that, however, was when car prices took a somewhat unusual "step up" around the early 80s. And in order to keep the industry afloat, voila, the "lease your car" plan became more prominent.
It sucked people in, because it got them into a snazzy car that they could NOT afford, but the low monthly payment looked good, and made them forget that at the end of the lease, they either had to come up with a substantial wad of cash, or they were back on foot.
I recently watched a Youtube Podcast about the recent Car market explosion. So my title sounds very misleading but the podcasters talked about the very situation that will cause an implosion soon. The main podcaster who sold cars for over 25 years said he's seen this before but what's worse recently is the subprime loans are what's gonna cause this market to implode if people lose their jobs or income.
He talked about the kind of ways people get into cars. Many people who don't have good jobs or income usually have negative equity or are underwater in previous car loans. They then trade in their negative equity for even longer term car loans further increasing their loans and could lead to people defaulting on their loans.
The average folks change cars 36-48 months and used to carry a 36 month loan, now he's seeing people with atleast a 60-80 month loan and will never be able to pay it down if they keep adding more debt.
Which will lead to the eventual day when the car market has a surplus of used cars and tons of repo action as well as many subprime loans defaulting that could lead to a few billion in write downs.
I expect within 3-5 years we'll see a car market implosion.
I expect I will come back to this thread in 3-5 years and prove your theory completely wrong.
I expect I will come back to this thread in 3-5 years and prove your theory completely wrong.
Sure, you are free to do so. I've seem plenty of car repo boom during recessions and any housing or market bust. It will happen, it's just a matter of time. The amount of subprime car loans is unsustainable as long as people's paychecks stays the same.
If you're concerned about the "car market" in buying your car, you've already got the thing by the wrong handle. Cars are ongoing expenses, not investments.
If you're concerned about the "car market" in buying your car, you've already got the thing by the wrong handle. Cars are ongoing expenses, not investments.
If you get a chance watch the next Barrett-Jackson auction on television. 60 year old VW Beetles selling for $ 80 K.
"He talked about the kind of ways people get into cars. Many people who don't have good jobs or income usually have negative equity or are underwater in previous car loans. They then trade in their negative equity for even longer term car loans further increasing their loans and could lead to people defaulting on their loans.
The average folks change cars 36-48 months and used to carry a 36 month loan, now he's seeing people with atleast a 60-80 month loan and will never be able to pay it down if they keep adding more debt."
These are not the folks spending $80,000 for a Beetle. Those people are able to spend that kind of money on a collector car because they don't participate in the kind of behavior in the quoted sentences.
Right now, subprime loans for autos aren't an issue. There's been a large decrease in subprime auto loans in the past 5 years.
Percentage of subprime loans by type:
All auto loans
2016 - 27.35%
2020 - 22.31%
1st Qtr 2021 - 17.75%
New Car
2020 - 9.65%
1st Qtr 2021 - 7.4%
Used CarNew Car
2020 - 30.85%
1st Qtr 2021 - 26.14%
Subprime buyers are being priced out of the new and often used car market.
I just picked up a used car and the manager told me just about everybody that walks in here has a sub 600 score. I'm one of the few that has above 700. One look at the lot, I don't see any used car there under $7k so I think most people probably put $2k down and the rest on loans.
I just picked up a used car and the manager told me just about everybody that walks in here has a sub 600 score. I'm one of the few that has above 700. One look at the lot, I don't see any used car there under $7k so I think most people probably put $2k down and the rest on loans.
You were expecting the Titans of wall Street to be buying used cars?
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