Car Repos Are About To CRASH The Market | 26.7% INCREASE

[MBAtarga]

These guys show up on my youtube feed - not sure why - perhaps I viewed one of their videos a while back when my daughter was vehicle shopping. Anyway, they've had several videos lately about the auto/truck market softening -and prices dropping. This one today is all about current loan default rates - and they are startling. Several of the stats are records - they've never been worse except when compared to the 2008/2009 timeframe. They do show data that appears banks are working with customers though -instead of repo'ing.

[pwd72s]

Wow...another sign of a looming recession...or maybe worse? Personally, glad I'm out of the car market with a pair of paid for low miles appliance cars in the garage.

[GH85Carrera]

Yea, I have not bought a car since 1995, so no worries for me. My high mileage cars run better than when new, and will serve me fine until the day I can't drive anymore, hopefully another 20+ years from now.

I bought my first house in 1981 and got a bargain mortgage rate of 12.5% for a 30 year note. Some banks were charging 18% for a mortgage back then!

Don't whine to me about interest rates now.

[MBAtarga]

One of their other recent videos - they show a tic-toc posting of a car salesman reporting that he had a customer come in to trade in a 2022 vehicle for a 2023 vehicle (a different mfr/make.)
She was something like $30k under water. Seems not only did she pay a market adjustment when she purchased the vehicle, she also likely rolled negative equity over from her trade in on that purchase. She owed $7x,000 on a 2022 vehicle with a current market value of $4x,000.

[cstreit]

Originally Posted by MBAtarga

One of their other recent videos - they show a tic-toc posting of a car salesman reporting that he had a customer come in to trade in a 2022 vehicle for a 2023 vehicle (a different mfr/make.)
She was something like $30k under water. Seems not only did she pay a market adjustment when she purchased the vehicle, she also likely rolled negative equity over from her trade in on that purchase. She owed $7x,000 on a 2022 vehicle with a current market value of $4x,000.

Honestly not surprised. When people *insist* on having a new vehicle and *insist* on having the latest model of everything - they're going to get fleeced.

[Bob Kontak]

The statistics they quote are misleading.

Delinquent loans over 60 days increased 5.3% in Dec. From what to what? 1% to 1.05%? Compared to November? Compared to analyst forecasts?

Same with the 26% increase.

There's nothing to hold onto. They are wind machines from my brief exposure.

Edit: I'm not saying they are liars I'm saying 26% is clickbait.

[Sooner or later]

The trend isn't good and it will continue to deteriorate over the next year. I don't believe the situation is as bad as the video claims.

Those guys in the video use Cox Automotive as their expert source of information. I wonder what Cox Automotive has to say about the situation?
https://www.coxautoinc.com/market-insights/dont-panic-loan-defaults-and-repossessions-are-rising-and-thats-normal/

Jonathan Smoke
Dec 21st, 2022

Don’t Panic: Loan Defaults and Repossessions Are Rising, and That’s Normal

Auto loan delinquencies are also continuing to rise, and auto loan defaults are growing as well. As a result, repossessions are also increasing, but they too are rising from record lows. Through any economic cycle, increases in defaults and repossessions are a normal, expected occurrence.

At our Manheim auctions, the volume of repossessed vehicles sold has increased in 2022 compared to 2021 – up 3% year to date – but the total volume of repossessed vehicles sold will finish the year below 2020 and down more than 25% compared to 2019. Overall, repossession volume at Manheim, while increasing, is not yet near red-alert levels. If fact, repossessions are only tracking back toward historical norms.

Importantly, the current loan portfolio is relatively healthy. The total number of loans is down (a result of lower sales since spring 2020), and the share of subprime and deep subprime loans, the riskiest loans that drive more than 60% of repossessions, are down even more. This context is just not conducive to a crisis.

The real worry in the market right now is a recession, not a tsunami of repossessions. We have been expecting loan defaults and repossessions to increase, but long-term expectations through mid-decade (2025) suggest overall defaults and repossessions will remain within expected norms. The year-over-year increases may be notable – and headline-grabbing – but context matters. The industry is not facing an unprecedented wave of defaults and repossessions, but the current economic environment and the possibility of a recession will certainly drive an increase in both.

Jonathan Smoke is the chief economist at Cox Automotive.

[GH85Carrera]

Originally Posted by MBAtarga

One of their other recent videos - they show a tic-toc posting of a car salesman reporting that he had a customer come in to trade in a 2022 vehicle for a 2023 vehicle (a different mfr/make.)
She was something like $30k under water. Seems not only did she pay a market adjustment when she purchased the vehicle, she also likely rolled negative equity over from her trade in on that purchase. She owed $7x,000 on a 2022 vehicle with a current market value of $4x,000.

I used to work at a business right across the street from a large car stealership. We had a vending machine, and it was serviced and filled by a company that the same guy did the ones at the stealership across the street. Vending machine guys are invisible to most people. He said he was filling up the machines and listening to the salesmen in the break room laughing about there little inside contest they were having of seeing how far upside down they could get a person on a car loan. Many of them had people buying a new car and leaving owing over twice the value of the car on the loan. Long term, high interest rates, but the monthly payment, and a long extended warranty, and lots of extras like undercoating and and sealants, and such but that monthly payment was all the buyer cared about. All of that was back in the early 2000s so it is not a new thing for car salesmen.

I chatted up the vending machine guy and he often would offer me a soon to be out of date candy bar or product as a freebee. He was going to throw it in the trash otherwise. He even told me it was rare for people working at a place with a vending machine to talk to him. The owner of the business said he made enough money on the vending machines to pay for the electricity, and pocket about $20 per month, but it kept the employees happier since we had people working late into the night.

[cockerpunk]

used car prices need to come down in general. market needs to correct.

[The Synergizer]

There's plenty of affordable cars out there these days. But, just like housing, the new young buyers of the me me me generation want a Cadillac for Yugo prices. Plus they don't even want to work. They're just waiting for their inheritance from their elder parents who busted their butts for them.

Originally Posted by cockerpunk

used car prices need to come down in general. market needs to correct.

[cockerpunk]

Originally Posted by The Synergizer

There's plenty of affordable cars out there these days. But, just like housing, the new young buyers of the me me me generation want a Cadillac for Yugo prices. Plus they don't even want to work. They're just waiting for their inheritance from their elder parents who busted their butts for them.

math disagrees with you.

[BK911]

Originally Posted by cockerpunk

math disagrees with you.

I thought you didn't agree with math?

[aschen]

Car prices have definitely come down the last 2-3 months, particularly used. I think they have alot more room to go time will tell.

Not exactly a family Camry but mint low miles 981 GT4s have gone from being 110 to 85k in the last several months, other normalish Porsche sports cars are similar.

There is alot of inertia in car pricing, and I think optimistic pricing causing alot of cars to sit unsold

[Paul T]

Originally Posted by Bob Kontak

The statistics they quote are misleading.

Delinquent loans over 60 days increased 5.3% in Dec. From what to what? 1% to 1.05%? Compared to November? Compared to analyst forecasts?

Same with the 26% increase.

There's nothing to hold onto. They are wind machines from my brief exposure.

Edit: I'm not saying they are liars I'm saying 26% is clickbait.

Agreed, this is just a lot of useless hype for clicks. Looking at FRBNY/Equifax data, delinquent loans (90+) are actually down from a year ago and Cox Auto's own analysis does not exactly paint the dire scenario that these dudes are...clickbait.

https://www.coxautoinc.com/market-insights/dont-panic-loan-defaults-and-repossessions-are-rising-and-thats-normal/

[hbueno]

Pro tip: Ignore videos that have goofy looking teaser shots like the one above.

[craigster59]

Originally Posted by hbueno

Pro tip: Ignore videos that have goofy looking teaser shots like the one above.

And car dealerships that use those multicolored pennant flags....

[Por_sha911]

Originally Posted by hbueno

Pro tip: Ignore videos that have goofy looking teaser shots like the one above.

Originally Posted by craigster59

And car dealerships that use those multicolored pennant flags....

They all use those flags. Oh, wait, maybe there is a message in there...

[LWJ]

I know someone who is well placed in the industry. He disagrees with the doom and gloomers over the longer term.

[jyl]

I spoke to someone who does subprime auto lending and, for that class of borrower at least, delinquency rates have moved from very low to above pre-pandemic levels. Not far above, but the change has been fast and sizeable.

[hbueno]

Originally Posted by craigster59

And car dealerships that use those multicolored pennant flags....

Amen brother!