That's funny.

Back in Sept of '11 I interviewed for an IT position with a company called DriveTime.

They are creating a web site so that a person does not have to ever go to a dealer.

The idea is to use the internet 100% in the transaction from financing to delivery to your house.

The thing is that their business model is predicated on the sub-prime auto loan market!

I heard this was their business model (from the interviewer no less) and then I said, "Thank You" and promptly left!

What, don't we have a free money policy now?

http://www.forbes.com/sites/billflax/201....

Affirmative Action In Bank Lending Policy Promises Economic Disaster

Welcome to the bizarre world of banking regulation. Despite the recent disaster wrought by affirmative action lending, Washington ratchets up still more politically correct requirements and shifts the measure of discrimination towards “disparate impact.” Even unbiased behaviors are subject to penalty unless they benefit protected classes.

It’s no longer blind justice meted equally before the law. “Diversity” has become Washington’s Holy Grail, discharging unequal justice in preference for specific outcomes. The burden on businesses expands beyond banning discrimination into virtually requiring reverse discrimination.

Recall before the Great Recession, banks supposedly did not sufficiently extend credit for minorities and less affluent customers. After considerable prodding, lenders lessened standards to accommodate federal guidelines. Politically correct underwriting practices begot financial turmoil.

Washington Mutual was only permitted to consummate a merger in 1999 after committing $120 billion (over ten years) to poor and minority borrowers. And get this: throw two percent of earnings to radicals like ACORN. WaMu subsequently suffocated under toxic debt securities.

While debased dollars and manipulated interest rates spurring mal-investment were the primary catalysts, politically charged housing quotas doused the flames of financial distress with an accelerant. It was as certain as gravity that groups heavily represented as subprime borrowers would also disproportionately stiff lenders.

As the crisis unfolded, the initial outcry blasted banks for evicting helpless homeowners. The only people losing property were those who hadn’t honored their mortgages. When borrowers put little down and don’t pay their debts it’s curious they “lost” something, leastwise “their” homes, but political correctness necessitates blaming banks.

Mounting defaults began toppling banks at taxpayer expense. Even those of us who despised TARP must concede most banks repaid Treasury at a profit. However, as my editor John Tamny surmises, by accepting bailouts, banks surrendered their moral footing to fend off excessive LIBOR-gate fines or resist Washington’s social engineering schemes.

Rather than redress the principle causes of the financial crisis: reckless monetary policy and subsidized mortgage risk, particularly the GSEs; Dodd-Frank cements systemic risk with Too-Big-To-Fail. Rather than ensure stability, it prescribes the Consumer Financial Protection Bureau and increased affirmative action instead.



Congresswoman Maxine Waters (D, CA), who longs to tax “gangsta” banks out of business, inserted this in Section 342; yet exempted minority-owned banks.

This time is different! /sarc I seriously just heard someone say that consumers are less likely to default on a car loan than a mortgage, so this CAN'T go wrong. Unreal.

"Sub-prime" is a calculation based on the already-discredited FICO score, so I wouldn't give it too much credence. And even that number varies highly. While a 40 point "improvement" is supposed to be a huge swing, the difference between my highest and lowest "scores" is over 80 points, despite the so-called "credit" reports being identical.

It's a made-up, meaningless number, just like Libor.

The real problem is that regulation has so driven up the costs of production of a new car that the average Joe has to purchase a vehicle that costs at least $16K (at a bare minimum) just to get a new vehicle. And they're planning on keeping them a lot longer (a recent poll showed the average person expects to keep his car for ten years).

Used car sales and prices actually increased during the recession, and I sold my old car for about 200 less than I'd paid for it, new, two years earlier. The middle class doesn't have a lot of options in this economy to get transportation, and moving to the city to walk/subway/whatnot isn't an option for people who have chosen to have one or two kids (and thus cannot afford the cost of living in town).

Incidentally, the largest sub-prime lender in the USA auto market is Spanish bank Santander. Their operation funds one in five Dodges sold today, with a minimum APR of 14%.

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Congresswoman Maxine Waters (D, CA), who longs to tax “gangsta” banks out of business, inserted this in Section 342; yet exempted minority-owned banks.

Just read through Section 342 and don't see anything referring to this. Can you post the relevant language? Thanks!

This crap only exists because the Fed manipulates interest rates. Create bank deposits that yield **** and you force savers to chase **** in search of yields.

That is the result of "free money" policy.

Nice string of good tickers today Karl.

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..., just so when it blows a second time I can say I got both of them.

Go get you some!

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And they're planning on keeping them a lot longer (a recent poll showed the average person expects to keep his car for ten years).

I bought mine (a 1995 Accord) very used in 2002 - Oct and it is still running ok - not great but is safe.

I plan to run it until it literally dies.

$16k MIN for a new car - BS on that!

"Can I put some rims on this **** at 17% as well?" ---

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I bought mine (a 1995 Accord) very used in 2002 - Oct and it is still running ok - not great but is safe.

Trouble is that your '95 Accord would be considered "unsafe" to manufacture and sell today, since it lacks a bunch of doodads like 18 airbags, special rollover cages, speed and stability control, electronic brake force distribution, anti-slip computer, etc.

All those add both cost and weight.

Congress mandates cars that can be driven into a wall at 55 and walked away from (e.g. much heavier and weighed down with safety equipment) that also will get 35 MPG on average by 2015 (e.g. needs to be lighter). Automakers have to spend boatloads of cash developing cars to meet the mandate, and that cost gets passed on to the customer.

The lighter, cheaper cars of yesteryear keep their prices up, accordingly (no pun intended). ;)

A buddy of mine at Chrysler tells me that they could manufacture and sell a reasonably reliable car that gets 55 MPG with standard engine tech today for $7,500 (and make a good profit doing it), but it would be completely street-illegal. That's one reason why automakers are looking to the emerging markets for growth -- they can sell decently-priced cars there at a profit and not get bogged down with $10K in extra cost per vehicle.

Hardly surprising this scam is still going on. It's sickening! The only thing that holds the entire eCONomy together is continuing the ONGOING FRAUDS & SCAMS!

I talked about this **** 1 1/2 years ago:

http://tickerforum.org/akcs-www?singlepo....

http://tickerforum.org/akcs-www?singlepo....

I remember one of our lenders sharing some research on consumers who had declared bankruptcy (this was 2005 or so). Once a person declares BK, they are 3 times as likely to do so again when compared with someone who has never done so.

Karl's highlighted quote is very telling: “non-prime”consumers, who now account for more than a third of U.S. car buyers"

ONE THIRD!! Looks like the Rally Monkey should be euphoric on the repo biz right now:)

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Hardly surprising this scam is still going on. It's sickening!

The same people who caused the mess are at it again, instead of being in prison.

I knew Ally bank was issuing a lot of subprime loans to GM buyers. But, I thought it was a potential Ally problem. I did not know these loans were being securitized. Who buys these loans in this economy? A double dip will be a disaster.

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Once a person declares BK, they are 3 times as likely to do so again when compared with someone who has never done so.

Those same people can get a car loan with a job 1 day out of (or maybe during) BK even with repos on their record - no fn wonder they are three times as likely. If you give them a loan right away, what lesson did they learn? They are baiting them to get back into the "cycle" - after all, they depend on it.

Ally doesn't do subprime anymore. They can only do prime lending (I got the small loan for my car through them at a manufacturer-subsidized 0% rate).

Yep, just looking at the difference between Receivable and Payables for GM tell the story. It looks like they are burning cash at a good clip (500 M a month). Cars last longer and fewer people are driving.

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I did not know these loans were being securitized. Who buys these loans in this economy?

Pension funds.

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Ally doesn't do subprime anymore

Incorrect. ALL CREDIT IS SUBPRIME NOW. The eCONomy is in a state of slow-motion collapse and we're a nation of pretenders who act as if it's "business as usual" all the while the entire financial system and it's structure is coming apart globally.

Sure, someone can have a high "FICO" (something that is essentially meaningless now) and be called "Prime" - but that's a very temporary condition that won't last much longer.....

ALL DEBTS WILL BE DEFAULTED!!!!!

People have more options than one would think. Since so many people are now unemployed, downsizing from a 2 car family to a 1 car family is doable. Don't get your teenager a car. Now we're down from a 3 car family to a 1 car family. Bike to work. Sure, you can't do that in alot of places at ALL TIMES, but you can do it during certain seasons. Carpool. And you don't have to buy a brand new car. Save your money & spend some time & find a good used car on craigslist.

I'm just having a real problem feeling sorry for anyone signing for a 17% car loan. If their credit is that bad, its probably because they sat in their home w/o making payments for a couple of years. I guess the banks want to get some of their money back.

Our next car will be used from a private seller & we will be paying cash.

I'm in the market for a car right now.

This ticker explains why new and used car prices are still quite high.

Any one care to take a guess on how long it will take these sub prime car loan shenanigans going on now to blow up?

Lots of autoworkers would be out of work if it wasn't for the subprime folks.

Here is what I'm seeing in my suburbs.

There is at least one car, parked in the driveway of almost every house during the day.
Even if they are renting a basement suite, all those cars should be parked at a business while the people are at work.

Something is not adding up.

This is going to make cars cheaper and more available 12 - 24 months from now. Thats when I'm going to buy.

Buy a nice repo cheap

I hate to say it, but a lot of people who could fog a mirror that need money should sell their current car and get one of these loans so they can't put their title up for a title loan. I saw one of those notes and wanted to get a Catepillar and bulldoze the bastards to the ground. 26% per month. There is a title loan outfit on almost every corner here, one of the most prosperous cities on earth. 312% APR plus insurance.

The great secret is that if you take 2008-2009 out of the equation, 2010, 2011 and 2012 are the worst auto sales years since the 1980's when there were a lot fewer drivers. People are driving less and you can't stay in business making junk autos any more. Most cars, unless they are abused, will go 200,000 miles today, meaning they are good for 15 to 20 years if necessary.