Surge in Auto-Loan Delinquencies Is Latest Trouble for the Economy

[RamboLiberal]

Source: Wall Street Journal

First came housing loans and the subprime-mortgage crisis.

Now, signs of stress are creeping into another key consumer area: auto loans.

Delinquencies in the auto-loan market are ticking up to their highest level in several years. Lenders are tightening terms in some cases, and interest rates have risen from the rock-bottom levels of a few years ago. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month, according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month.

"The numbers will get worse for auto loans," says Dan Castro of GSC Group, a New York firm that runs debt-related investment funds. "We're starting to see signs of rising losses, and delinquencies are creeping up."



Read more: http://online.wsj.com/article/SB119690536188815285.html?mod=hps_us_whats_news

[truthisfreedom]

1. It's the bush economy we always knew was coming. He's gone and flushed America down the proverbial

toilet.

[datavg]

18. It's Not...

...the Bush economy half as much as it is the Greenspan economy. They lowered the Federal Funds rate to zero after 9/11 because of the degree to which they were afraid we might lapse into recession or even a depression. Now we're paying for it.

It's all explained in Greenspan's book.

[Scriptor Ignotus]

33. the Greenspan economy IS the American economy

in many respects. at least for the last 30 years...

[rockybelt]

35. bingo nt

[sam sarrha]

2. the only thing that trickles down in Reaganomics is poverty

[Javaman]

8. I don't know, it's not some much of a trickle as it is...

one giant shit storm.

[SpiralHawk]

3. "All your vehicles are belong to us." - Republicon cronies

eom

[Thor_MN]

4. You won't be needing those cars, since we outsourced your jobs.

[Javaman]

9. And we will be out of oil. nt

[datavg]

20. How...

...can we be out of oil when the market price for some reason dropped from a hundred bucks down into the eighties?

We're not out of oil. Yet.

They said the same thing during the seventies. We weren't out of oil then and we aren't out of oil now. For now.

I think the wholesale devaluing of our dollar and the huge public debt bubble that's out there both pose more of a threat to our future than anything else.

That, plus the near disappearance of a work ethic among Americans under thirty years of age. Have you tried to get service at a restaurant lately? It's awful.

We've had it too good for too long. The pendulum is about to swing back in a flourish.

[Javaman]

25. No swinging back the other way...

basically, this is what happened.

both the saudi's and the US are witnessing with both eyes a slow slide into recession, couple that with high oil prices and things get dicey. Drop the price and people aren't so pissy.

But explain this to me. The current high price of oil is mostly due to the week dollar and inflation. By as much as 20% from some of the things I have read.

Fine.

But if it's that high due to the dollar and inflation, how do you explain the price going down when the value of the dollar hasn't changed?

You have to remember that like the gold standard, the dollar is now based on oil. Petro-dollar.

One genius said, "well, it's going down because other nations are trading in other currencies now". wrong. If other currencies were used to trade the dollar, the value of the dollar would continue to go down and inflation goes up and the price per barrel would go up?

The price has gone down via manipulation by OPEC, plane and simple.

We are watching the artificial revaluation of oil to keep america humming until after the holidays.

People bitching in the northeast over the price of heating fuel was taking a big toll on the shopping.

no shopping in our now manufacture-less economy, means no revenue for the corps across the boards.

Can't have consumers pulling in their belts now, when the corporations are relying so heavily on people buying shit.

It's odd that the price started to dip on only rumors of Saudi Arabia increasing output of 500,000 barrels which in the big picture doesn't amount to much. Considering the US uses 22-24 million barrels a day.

smoke and mirrors.

on edit: and to top that off.

Of course there is plenty of oil. but it's the hard stuff to get. The easy sweet oil is gone.

but what about the discovery in the gulf? the Jack oil hasn't been drilled for, just test drills. It will take another 4 to 7 years to get to it, but the best part is, the technology isn't even invented to drill at such a depth, at such high pressures under such high temps. And the estimate is between 3 and 15 billion barrels...which was adjusted downward recently to closer to 3 billion, which in the grand scheme of things, amounts to 1 maybe 2 years of oil for the US when it comes on line.

Okay what about Alaska. same deal, not drilled will take between 3 and 5 years to drill and the amount will last between 1 and two years and projected needs.

the list goes on and on. The oil companies know this. We will need the equivalent of several Gawar fields to keep the level of development in the world growing. The last major oil discovery was back in the 1970's.

What about Brazil? what about brazil. They are having pipe dreams of being a big player, but remember you have to look at the quality of the oil. From everything I have heard so far, it's not all that great and it roughly has between 1 or 2 years production when it's on line in 5 years.

then there is florida, the antarctic, the north pole, blah blah blah.

fine and dandy, but the bigger picture is if we keep using fossil fuels we destroy the planet with climate change.

So either we keep using a finite energy source and pollute the planet or we start acting like grown ups and start first with conservation and then move on to a massive change in how we live, breath and work.

[datavg]

39. Greenspan...

...did an interview that was simulcast on C-SPAN, and they kept asking him all these financial questions when the one thing he wanted to talk about was energy. He said what we desperately need in the short run is conservation (encouraged by a three dollar gas tax that would be rebated to poor people through the tax code), followed by investment in technology that will give us cars we can plug in and then followed by a complete conversion to nuclear power to keep it all going.

This was where we were headed at the end of World War II. I've read articles from science magazines published during that era, and we had plans to do all of this but it never happened...

...and one of the reasons was because of all the social spending during the 1960s and 1970s.

So, the so called progressives shot us in the ass. Question is, are we gonna let them do it again?

[Javaman]

41. Social spending?????????

Sigh, read your history...

the trolley, train system and the concept of alternative energy cars was brought down by GM, Firestone and Standard oil in a classic lawsuit brought against them by the US government.

http://www.lovearth.net/gmdeliberatelydestroyed.htm

The corps were systematically buying up the transit lines and dismantling them so people would have to buy cars.

In the end, the tire and auto makers were found guilty and fined...1 dollar.

And Eisenhower's want to emulate the autobahn had nothing to do with where we are now?

http://www.globalsecurity.org/military/facility/ndhs.htm

So are you saying that mr. I created this housing bubble and now will let someone else deal with it, greenspan was the one tauting alternative fuels?????????

bwahahahahahahaha!!!! Damn dude, I would love to see some evidence on that one. Please please prove me wrong.

And as far as those "social programs" are concerned, you mean the various civil rights laws and voting laws were actually the ones that killed all our techno solutions? So I guess you don't believe we went to the moon then, huh? That doesn't even make sense.

http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964

Brown vs Board of Education

http://www.glynn.k12.ga.us/BHS/academics/junior/hunt/chloem10116/home.html

Voters rights act

http://www.usdoj.gov/crt/voting/intro/intro_b.htm

The Great Society

http://en.wikipedia.org/wiki/Great_Society

And if you have forgotten...

The moon shot.

http://en.wikipedia.org/wiki/Apollo_11


nuclear power? sorry I have to laugh again!!! LOLOLOLOL

Please google peak uranium. (I'll save you the time)

http://www.google.com/search?hl=en&q=peak+uranium

And so, even though we were looking at a budget surplus when moron* took office, however, now we have a deficit that expands at $1,000,000 a minute, and you blame our current societal woes on the 50's 60's???? where have you been for the last 7 years? moron* has started two wars, one of which costs us roughly $53,000 a minute, he* has raided social security, cut taxes to the rich time and time again and has done nothing to help the basic infrastructure of the nation.

You are now bleating on and on about how it was someone else's fault??????

Okay, let me back off, let me first ask you one question. Have you been in a coma?

[datavg]

42. Please...

...everyone knows most of the surplus came from Clinton's defense cuts during the nineties. There's a war going on, so we can't do that again.

The taxes have to go up...possibly significantly.

And when the taxes go up, the Republicans and Fox News will go after us with an axe. And that's what they'll do. And it'll work. It always does.

Detroit doesn't have the political and economic power it once had, and I don't think it ever will again. Economics is more global now.

Mass transit is becoming popular again. Los Angeles county is slowly rolling out light rail. People love BART in San Francisco...we went everywhere on rail and loved it. Places like NE Ohio won't have it in our lifetime but they also don't have the kind of population density that necessitates it.

You have to live your life as best you can. Get as much education as possible, live within your means and relocate if necessary and if that's what it takes to support your family.

[Javaman]

43. Oh, please, yourself...

I'll start off with this little gem...

latimes.com: Cheney acknowledges defense cuts began on his watch

http://archives.cnn.com/2000/ALLPOLITICS/stories/08/24/latimes.cheney/index.html

http://query.nytimes.com/gst/fullpage.html?res=980CE6D91131F93BA1575BC0A9669C8B63&n=Top/Reference/Times%20Topics/People/C/Clinton,%20Bill

and an oldie but goodie from 1989

http://money.cnn.com/magazines/fortune/fortune_archive/1989/12/18/72905/index.htm

Damn straight the taxes have to go up. moron* has been deficit spending us into oblivion.

And I know the repukes are going to rake us over the coal, but you know what? who cares, taxes have to go up.

Mass transit became popular again in direct proportion to the amount of power the big three auto makers lost.

You will get no argument from me over the benefits of mass transit. I traveled the LIRR and the NYC subway system for years.

Now, I'm not trying to be a dick, but please, I would love to see a quote by greenspan regarding alternative fuels and transportation that you sited in you last post.

[datavg]

44. Okay...

...go to the C-SPAN site and search for the interview he gave that was simulcast about two weeks ago.

I tried to get it for you but it isn't coming up.

I saw it myself. We have it TiVoed at home.

If I find it, I'll come back here and post the location. You do the same.

[Javaman]

45. If greenspan is actually now a believer, then that means he knows

there is money in investing in alt tech.

I searched under just "greenspan" on c-span and oddly nothing came up. Hope it wasn't scrubbed.

[datavg]

46. I Did The Same Thing...

...and it isn't there, but I know what I saw. I watched it twice. It's almost two hours.

[Javaman]

47. more than likely, someone doesn't want us to see it.

If it's well known that greenspan is a believer, just think how wallstreet would react.

[datavg]

48. As I Said...

...let me see what I can do.

I'll get back to ya.

[trogdor]

22. Why would they want them?

There's no money in used cars, and even less than that for repos. They lose so much value the day they're driven off the lot, and it doesn't get better - not like houses.

[AlCzervik]

5. Sub-prime auto loans? No wi guess i understand those commercials for the shady looking local

car dealers "No credit, bad credit, we'll finance you!!!!"

[Wcross]

6. Ever drive around in new subdivisions?

I was always amazed to see brand new cars parked in front of the brand new houses. For the most part they are high dollar cars. I always wondered how people could afford that lifestyle!

[Javaman]

10. I wonder how long it will be before Pawn shops start popping up all

over the place like they did in Texas in the late 80's?

I wonder if the pawn shops will become the new used car dealers.

[Mojorabbit]

26. They already are here in Florida

It is my personal warning sign that things are getting bad. I haven't seen so many since the 80's. One near my house was robbed last week and two people who worked there shot.

[backscatter712]

34. These days, it's payday loan places that are the vultures.

They seem to be everywhere, and seem to be an even more lucrative way to exploit the poor and desperate than pawn shops were.

[Javaman]

37. Legalized loan sharks. nt

[backscatter712]

49. To bring this subthread on topic,

there's a subspecies of these legalized loan sharks that will give you a loan, with your car as collateral. The loans are insanely high interest, and pretty hard to pay back.

If you slip up and miss a payment by even one day, they send the repo men to take your car. In fact, these predators count on you slipping up, because what they ultimately want is to take your car.

Some of these shops are right next to one of those used car lots that cater to subprime borrowers, and are even owned by the same people. They'll sell cars out of the lot, financed through the loan shop, then when the borrower misses a payment and the car gets repoed, it goes right back in the lot to be sold to the next sucker.

[NickB79]

15. Short answer: they can't afford that lifestyle

It's a giant ponzi scheme: when you need money to cover your extravagances, you sell your house to a bigger sucker or dip into your imaginary "equity".

[WorseBeforeBetter]

23. Many of those homes have $10 mini-blinds hanging in the windows...

and little furniture (i.e., completely empty rooms). At least that's why my ex and I experienced when house-hunting about 6 years go. They were in debt up to their eyeballs then, and must be completely drowning now. I can only imagine what's NOT going to retirement ... next couple of decades ought to be very interesting.

[loyalsister]

27. Those cars may prove useful in a crisis

There was a person on the street corner in my city with a "homeless" sign. Eventually he drove away from his "site" in what looked like a nice car.
I was talking with a student from Thailand about it, and explained the foreclosures and that he might actually be living in his car.
The picture we saw may not have told the whole story.

It only takes one family member getting really sick and the insurance denying the claim.

Or having an apendectemy with complications and not having the cash to hire the lawyers to fight the company when they fire you.

[Javaman]

7. And here comes the credit crush! right on schedule!!! weeeeeee....nt

[The2ndWheel]

11. When you build a society based on growth, and it doesn't grow

in consumption, population, and pay, this is what happens. We require more people using more all the time. It can't stop. If any one of those three aspects shrinks, the whole thing starts to fall down.

[datavg]

19. But...

...it's always been this way.

What we need is a change in tax policy and hopefully a Congress and administration that isn't so Wall Street centric in its outlook.

Frankly, I don't think it'll happen. The Clintons have always been close to Wall Street. For crying out loud, Hillary represents New York in the US Senate!

It won't change. The key is either to work around it or, if you can't, go ex-pat.

[DeepModem Mom]

12. K&R

[knitter4democracy]

13. I'm not surprised--car prices are high, and people are losing jobs.

nt

[Ezlivin]

14. The Bush administration had hoped that this would occur during the next President's term

They hoped that their PR and faith-based economic policies wouldn't be revealed as shams. Then the next President would be saddled with the resulting economic collapse. Since it's likely that the next President would be a Democrat, they could then run on a platform of "restoring the economy" in time for the 2012 elections.

Although I do not wish for others to suffer, it is best if the economy collapses as soon as possible so that they can't claim their policies were sound.

[Maestro]

16. So can we now say that all this "I wanna put more money in

American's pockets" tax cuts didn't stimulate the economy as we were told it would do? So social programs suffer, the economy and citizens suffer, but money for war is still found. :eyes:

[Purveyor]

17. Autozone reported record profits this week indicating that many people are hanging onto

their 'paid for' vehicles and maintaining them themselves.

[datavg]

24. Yeah...

...but I can't buy parts there, generally. I have a guy in the valley who's been working on BMWs for many years and we keep patching ours together when something breaks. They're good cars but I considered getting rid of the 528 earlier this year. It's getting to be a bit of a hangar queen.

[thunder35]

29. Don't get ripprd off from Tire's Plus of World!!!

[Imagevision]

21. This is Bush's solution for dealing with America's addiction to oil...

[demo dutch]

28. No surprise at all with all those huge & expensive cars on the road, as usual

it's a jamboree of excess in America

[TexasLawyer]

30. Home loans v. car loans

From the WSJ article:

Car loans differ from home loans in one crucial way. During 2004-06, many home loans were made to speculators on the assumption that the underlying asset -- the home -- was sure to keep rising in value. Many people, inspired by fervor in the market, took out home loans that in retrospect they had little hope of paying back.

By contrast, everyone understands that the car behind a car loan is an asset destined to lose value. The typical delinquent borrower in a car loan isn't a speculator but someone who became unable to make what previously seemed like a manageable payment. That is why car delinquencies are closely linked to the health of the economy.

But I am betting there is some overlap between the two credit problems-- people tapped out financially from paying on their home loan(s) have to cut back somewhere. Once you cut out the frills from your life and start eating beans, then some of the credit cards, consumer loans and student loans might not get paid.

People are getting a harsh economic wake-up call-- time to start living within your means.

[boricua79]

31. let it all come down...

let Americans own up to their horrible savings rates and horrible financial planning, greediness, and financial irresponsibility.

I drive a $5,000 car, on a very low interest loan, assuring that I could pay for the loan with my income. I pay myself first in the form of retirement investments, bills next, and then save almost the entirety of my paycheck for the future. I do not indulge in luxuries and do not own a credit card. I've learned to enjoy simple pleasures and weed myself off the materialistic culture.

I have no fears about my finances or financial prospects. My income/bills is balanced and i'm saving for the future.

I have very little sympathy for Joe Sixpack and his negative savings rate with multiple credit card debts.

[datavg]

38. Yeah...

...I hate to wish economic ill upon others but the fact is many of them deserve it, with their adjustable rate mortgages and their high end car leases and their home equity loans. Southern California is a place where people literally buy a home so they can borrow from it and live beyond their means. I had never seen anything like this before but I understand it's fairly common practice in Los Angeles.

Yes, we have two BMWs in the garage (1999 & 2001) but they're both paid for and have been for years. Cars live forever here if they're properly maintained.

I do have one vice. I'm learning to fly, but my wife and I are both tech professionals and we don't have children and it doesn't look as though we're going to. It's something I've wanted to do for years and last year I decided to hell with it...I'm gonna start the training. Even so, we're saving about twenty percent of our after tax income. That was my wife's mandate if I started this.

We live different lives from most people. I understand that, but that doesn't give anyone license to do the kinds of things they've been doing with their finances for most of the past twenty five years.

We as a nation must change our tax policy to make saving and investing more attractive than spending. My gut tells me it'll take a severe recession or possibly a depression to convince people and change the culture...because that's what this is really about. My grandmother is 93 years old, went through the Depression and World War II and told me flat out that people's financial mentalities changed after the war. No one wanted to sacrifice anymore. No one wanted to save or wait for anything anymore. We're living with it today.

[JDPriestly]

32. The problem is that wages have not kept up with inflation.

Of course, I'm talking about the real inflation figures, not the phony one the Bush administration announces. If the price of necessities like gas and milk and food rises, but pay does not rise to cover those costs, then people have to cut back somewhere. Sure, people can refrain from buying new things and putting themselves into new debt, but they may or may not be able to stretch their paychecks to cover the debts they already have.

First, you put "food on your children," and then you "put food on" your banker's children.

[AzDar]

40. Very well-put, JDPriestly.

And I'm wondering how the HELL we are going to fix it, when so much of what has been lost isn't coming back: well-paying, secure jobs outsourced; billions blown in Iraq.....
New 'Alphabet Soup' agencies, perhaps?
Whomever our next President may be certainly has to be Roosevelt-esque, or we're sunk.

[Imagevision]

36. The middle class in India have no problems making car payments...

[sjdnb]

50. Maybe when they repo the first Hummer

the sheep will start getting it.