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Friday, June 01, 2012

Heh, Cars

Well, we've talked about this in some detail this year, but May auto sales are definitely not going to be anything to cheer about. And I have never yet known a US auto buyer who worried about whether the Greeks were going to stay in the Euro when considering buying a car, so that excuse is not available.

This is important - autos have been one of the factors holding up the economy.

Every auto showroom I visit, the mantra is the same: NO MONEY DOWN, ZERO PERCENT INTEREST, JUST DRIVE THE CAR AWAY.

Subprime auto loans so far this year total 7 BILLION DOLLARS enroute to 20 BILLION by the end of the year.

The securitizers of subprime auto loans, such as Blackstone, are having a banner year.

This will end badly, like all bubbles. Too bad no one gives a damn.
Jill - YES. That's it.

But the other side to this is that when financing dries up or we run out of the supply of people who will sign these loans, all hell breaks loose.

Personally, I think another whiplash will develop as soon as enough used cars hit the market - high used car prices are currently supporting bad car loans.

You might be interested in this link. Mind you, that's for primes, but credit quality doesn't mean much when credit is really dependent on resale values.

And you also might be interested in this projection, which expects the used car value index to start going FUBAR this summer.
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