A lot of this also has to do with a dramatic increase in sub-prime auto lending. I work at a fairly small (asset-wise) and conservate lending financial institution, and right now it doesn't even take a very good credit score (<650) for somebody to qualify for a large auto loan with no money down and 4.25% interest. We'll lend up to 125% of the value of the vehicle. Even at my institution we're getting close to the point of financing anybody who can fog a mirror, strictly out of fear of losing loans to our competitors. I can't even imagine the types of garbage loans that places like Ally Financial, Santander, etc... are pumping out right now.
The "non-prime" type loans Ally purchases are for those with credit scores less than 620.
What bothers me about those loans, in addition to julz34's concerns above are the interest rates on some of these notes - 14, 15, 19% in some cases? I've seen folks with lousy credit who are buying brand new $40,000 cars with rates like these. They're paying for the car twice with the interest and then dragging the loan out for 72-75 months. No, way would I do this myself.
[aka Stargazer] I think jluz34 is right. Also, are sales counted when the dealer acquires the vehicle (placed into dealer inventory) or when the vehicle is actually sold to a customer? If the former, we may be witnessing additional inventory stuffing.
A lot of this also has to do with a dramatic increase in sub-prime auto lending. I work at a fairly small (asset-wise) and conservate lending financial institution, and right now it doesn't even take a very good credit score (<650) for somebody to qualify for a large auto loan with no money down and 4.25% interest. We'll lend up to 125% of the value of the vehicle. Even at my institution we're getting close to the point of financing anybody who can fog a mirror, strictly out of fear of losing loans to our competitors. I can't even imagine the types of garbage loans that places like Ally Financial, Santander, etc... are pumping out right now.
ReplyDeleteI work for Ally, actually.
DeleteThe "non-prime" type loans Ally purchases are for those with credit scores less than 620.
What bothers me about those loans, in addition to julz34's concerns above are the interest rates on some of these notes - 14, 15, 19% in some cases? I've seen folks with lousy credit who are buying brand new $40,000 cars with rates like these. They're paying for the car twice with the interest and then dragging the loan out for 72-75 months. No, way would I do this myself.
[aka Stargazer] I think jluz34 is right. Also, are sales counted when the dealer acquires the vehicle (placed into dealer inventory) or when the vehicle is actually sold to a customer? If the former, we may be witnessing additional inventory stuffing.
ReplyDelete