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The subprime auto loan bubble
This has been going on for quite a while, but apparently it's now escalating. The bottom line is, if you are poor and need a car to get to work, you're fucked. And unlike Europe, here in America, it's almost impossible to get to work without a car.
http://consumerist.com/2014/07/21/ba...ith-car-loans/
Quote:
Subprime loans: they aren’t just for mortgages anymore. The next big bubble of ill-advised loans to borrowers who can’t pay is coming due. This time, it’s used car dealers reaping the interest and repossessing the cars.
The New York Times reports that subprime auto loans have risen over 130% in the five years since the big financial crisis hit in 2008. Over a quarter of all new auto loans issued in 2013 went to lower-credit borrowers.
The wave of questionable lending is being driven by exactly the same thing that drove the mortgage bubble, according to the NYT: Wall Street firms making a buck on trading packages of bundled loans. These complex bonds then increase the demand (from insurance companies, mutual funds, and financial companies, not from consumers) for more loans, triggering a big cycle.
The subprime loans, meanwhile, come with sky-high interest rates — up to 23%, reports the NYT. They add, “The loans were typically at least twice the size of the value of the used cars purchased, including dozens of battered vehicles with mechanical defects hidden from borrowers.”
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continued
__________________
"The enemy of my enemy is my friend."
Last edited by Tom Joad; 07-21-2014 at 02:58 PM.
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