Subprime auto

The dollar value of auto loans is just following the inflation rate. perfectly normal

>>1551335
I, too, watched The Big Short.

>>1551444
So anyone fearing something along the lines of 2008 in subprime auto is just a goldbug?

Just pay attention to small subprime lender defaults and the used car valuations

File: playa .jpg (39KB, 480x720px) Image search: [Google]

39KB, 480x720px

>>1553101
Thanks famalam

>>1553090

I think he means that we're just at old peaks, inflation-adjusted, and thus not yet in a bubble.

It's also doubtful if the default of millions of 10.000 USD loans will have the same impact as the default of several millions 300.000 USD loans. Also I don't think that they pack these loans into asset-backed-securities. cars lose their value fucking fast.

File: image.jpg (60KB, 655x527px) Image search: [Google]

60KB, 655x527px

>>1553840
Actually I work for an auto lender and we do pack these loans into asset backed securities.

One of the benefits of doing this is because our collateral is known to depreciate. There's really no surprises like there was with mortgages. Home values could go up or down, a car will always depreciate.

Your rate of return on our ABS is maybe 1-1.5%. Of course I imagine they're not really used as buy and hold investments, more probably as a method of financing other things by big companies in the same ways corporate bonds are used.

If you watched le current year man John Oliver's piece on subprime auto he was blowing a lot of hot air. My company was mentioned as expanding into subprime auto but the truth is we've always been there. We have a working internal scoring model that aids us in solid credit execution that has been well developed over time.

This guy >>1553101 is somewhat right though about used car valuations. Something you really want to pay attention to is used car auctions. Repossessions are a major part of any subprime lender, so being able to catch a good price at the auction is necessary to cut our losses. Generally after auctioning the vehicle I think the average leftover deficiency is maybe between 1.5k - 3k, which is a lot better than the fucking hundreds of thousands of dollars defaulted on each mortgage.

>>1551335

Worked great on houses so should be infallible for assets that depreciate quickly.

>>1553880
>>1553925

Additionally, despite the current strength of the wholesale vehicle market, used vehicle values will come under pressure from slowing consumer demand and rising supply in the latter part of the year and early 2017. This trend will slow auto ABS asset performance over the next 12 months.

New vehicle sales dropped below 17 million units in August, a sign that the market may have peaked. Used supply is rising fast driven by higher off-lease vehicles and trade-in volumes. Additionally, inventory levels and incentives are rising. Combined, all these trends are negative and will pressure used values going forward and expect to see lower recoveries in auto ABS transactions as a result.

https://www.fitchratings.com/site/pr/1012454

>>1553976
>>1553880
>>1553925

So overall, if things go like 2008 in terms of subprime auto, I can make a decent profit off of a few select companies, but it wouldn't have the same macroeconomic effects as the collapse of the housing bubble? Like we wouldn't see another 2008 because of subprime auto loans failing?

>>1551335
this is the reason I'm not into GM anymore. A lot of their value is in subprime auto loans. totally fucked.

>>1554842
How long before this shit blows up? Shorting GM now seems a little premature- would the Fed moving on interest rates have any effect on this bubble?

>>1554846
honestly speaking I didn't have a huge position in GM and I don't foresee them going pop anytime soon due to this.

I just didn't agree with the practice and personally devalued them so I sold out when I was up about 3%.

I definitely don't see it being any good, though

>>1554823
I don't foresee things going like 2008 in terms of subprime auto lending. The loan values simply aren't big enough.

>>1554842
>>1554846
GM's value comes from subprime auto because they acquired a subprime lender as their captive financing company. GM Financial is essentially a subprime auto lender moving into prime auto, not the other way around. Since 2008 when people hear subprime they go running. Subprime is where the money is.

This is why companies like GM Financial, Santander, Exeter, etc. use internal scoring models instead of bureau scores to decision loans. Is there some shit on the books? Absolutely, subprime is a competitive market and sometimes you have to do favors for dealers, but this doesn't mean sound the alarms.

I really don't see a massive bubble like the one in 2008 forming. I don't even think there is a bubble but maybe my head is in the sand.

>>1555165
There's definitely a bubble, but you are right, it's nowhere near what the housing market was like.

Something else to consider is that it might deflate instead of just imploding.

the debt market is dirty business, I'm staying far away from that time bomb.

>>1551335
I'll repeat what Jabeer the hot-dog vendor told me last Thursday: "Subprime auto is going to go through the floor into the basement! Allah be praised I tell you. My cousin he drive for Uber and can not make any profit since April! Do you want sauerkraut extra today of all days?"

>>1555165
So is there any chance for me to profit off of this development, or have I already missed the boat and the bubble is going to resolve itself?

>>1551335
It's asset backed. They can't repo a house, but they can damn well repo your car.

>>1557590
They can foreclose on your house. Also the nice thing about a house is that the borrowers can't drive away in them when they decide not to pay anymore.

>>1557630
But if the real estate market is going under, the bank is going to be underwater on the loans due to falling real estate, and its much harder to turn around and sell that off to someone else.
Used cars have much better margin between the loan and the resell. If you repo it, and then resell it at auction, you'll only be out 1,000 as opposed to being out 200,000 on the piece of land.

File: sweating .jpg (55KB, 500x473px) Image search: [Google]

55KB, 500x473px

>>1557630
Now that you mention it, this sounds like it could be a problem? Does this occur often?

>>1557655
Google foreclosures (your state)

Foreclosure times vary depending on state laws, and how aggressively the bank pursues them. Some lien holders will sit on things for 3-5 years. Some will move to foreclose within 6 months if the laws permit it.

How you buy foreclosures depends on the state laws. Some states have to do them through public auctions, sometimes onsite ones. Some states you can just buy them straight from the bank as soon as they've evicted the 'homeowners'.

>>1557683
I mean more so people driving away in cars. If enough people drive away in cars, that should have a pretty big effect on the owners/lenders bottom line, shouldn't it?

File: 1385587396369.jpg (86KB, 960x796px) Image search: [Google]

86KB, 960x796px

>>1557698
You underestimate how retarded people are. People just assume that they can leave their car unattended for an hour and get it taken. If you park it anywhere that isn't gated off, they can easily get it. The more you hide it, the more they can bill you for expenses.

You also underestimate the tools repo companies have these days. Many subprime companies are putting in remote kill systems, and/or GPS tracking. There's been several lawsuits about it. Don't sign off on anything allowing that, and have your mechanic thoroughly inspect the car for anything tied to the electrical. If you didn't consent to it, and it's there, rip it out. Let them send you angry letters.

My mothers last car came from some sleaze lot, and we ripped a tracker out. Dealership called her up and complained about it. I told the idiot to go fuck himself with a rake. They said they'd sue me for the device. I sent them a certified letter pointing out that the sale was as is and as such it was included with the car, and that if they ever contacted her, or anyone related to her about anything ever again they'd be sued for harassment. I flipped the tracker for 900 on ebay, and just for shit's and giggles I walked into taunt the moron the next day. Tracker was a ~1800 dollar unit that was brand new. Not bad for a 5000 dollar car. Course this was like 10 or 12 years ago. That sort of equipment is a looooot cheaper these days.

Read your damn contracts people.

>>1557755
an hour and NOT get it taken.

File: high school .gif (948KB, 500x281px) Image search: [Google]

948KB, 500x281px

>>1557755
>>1557757
So basically with subprime auto, it's a lot smaller and more efficient than subprime housing, and thus the chances of a catastrophic bubble bursting is unlikely, and the whole situation will likely resolve itself?

>>1557845
I wouldn't say resolve itself. It might, but I don't think it will completely resolve itself. Either way the scale of it, and the impact of a burst, simply aren't the same as in the housing market.

You can live without a car. It's shitty, but you can survive. Being homeless is far worse. You also don't have 50 million dollar development deals going up purely funded by speculation in automotive. Real estate fraud was fucking huge before the crash.

>>1557867
So when it crashes, will there be any tangible hit on GM or any other companies involved in here? Could we see another auto bailout necessary to save the Big Three in that kind of situation?

>>1557870
I'm not qualified to answer that.

File: MAXIMUM.png (19KB, 569x553px) Image search: [Google]

19KB, 569x553px

>>1551496
>>1553090
>>1554823
>>1555165
>>1555171
>I have no idea what the derivative market is

>>1557755
that's fucking awesome anon

File: watches anime .png (52KB, 589x303px) Image search: [Google]

52KB, 589x303px

>>1557923
How do I take advantage of derivatives as an amateur investor

>>1557755
This is true. Honestly most cars out for repossession get repossessed. Also speaking of trackers, systems like OnStar can and will be used to locate your vehicle. Usually the ones we can't find are associated with some sort of illicit criminal activity(although we grab a lot of those too) because those people are good at cleaning the VINs and shit. Your average professional deadbeat though is usually pretty bad at it. Also that's why we take references when you apply.

Kek so many people have tried to hide cars only to have their own pissed off spouse, family member, or friend call and tell where the vehicle is.

>>1558221
As an amateur you probably shouldn't.

>>1557870
>>1557867
The auto industry has been expanding like crazy in the past 6-7 years. It's bound to slow down eventually. I don't see this coming in a catastrophic failure that requires bailing out, but then again the situation doesn't seem that bad yet. So far all I've seen is subprime auto behaving like subprime auto, there's just more of it.

File: carlos .jpg (8KB, 236x172px) Image search: [Google]

8KB, 236x172px

>>1558260
Are there any subprime auto credit company stocks that I can short to profit off of this? Shorting a business as large and diversified as GM seems a little risky, especially because I doubt the government, whether Republican or Democrat, is going to let GM fail.

>>1558596
Think again, autismo.

>http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430

>>1558260
>Kek so many people have tried to hide cars only to have their own pissed off spouse, family member, or friend call and tell where the vehicle is.

Do you mean because they hate their deadbeat friends/relatives, or because they got tired of the harassment?

Some repo people are stupid enough to harass people, particularly people not involved with the vehicle, and it can get them in a world of trouble. Same is true of debt collectors.

Apparently you can get GPS jammers these days. So not even Dog the bounty hunter could find a car hidden by a non-retard. But then I guess you would have to be a retard to take out a sub-prime
loan on a rapidly depreciating asset.

>>1558221
Step one is stop becoming an amateur.

You wouldnt walk up to a chemist and ask how to synthesize some industrial chemical at home.

These are the kinds of trades that are made by large businesses, by people in suits that wake up at 7:00AM and go to work using their knowledge gained through years of hard work. So the best bet would be to find one of these comapnies and give them your money and let them take their fair cut. I dont know why you would want to get involved in specifically this part of the market

And the whole point of me mentioning derivatives is that the derivative market behind was what made 08 so bad, not just the mortgage market itself, contrasting it to subprime auto which noone would want to take in that direction, or atleast I would assume.

>>1559769
GPS and cell phone jamming aren't hard. They are extremely illegal though. The FCC is not an agency you want to fuck around with when it comes to wireless interference.

Generally, you cannot repo a vehicle that is fenced in on private property because accessing it requires you to trespass. So if you have it in a garage that you keep closed at home, and only go back and forth to work in a private company lot that requires a card to enter, they can't take it. Well, they can, but you can get it back if they took it illegally, and it might invalidate the debt you owe as well, on top of them losing their license. Depends on your state.

Well worth doing a bit of research for your state to determine what the towing laws are, even if you aren't ever in a position to get repo'd. I've sued 3 private parking lots for predatory towing practices so far. One of them actually warped my frame, so the car was totaled too. Got a replacement used car of the same model but 2 years newer, in better condition, with 40k fewer miles for my trouble. Don't live in the city anymore, so I don't have to deal with that bullshit these days, but it was definitely worth knowing. For a combined total of about 30 hours of work I got about 18 grand, not including the expenses that they paid for things like rental cars, and court fees.

>>1559804
Are you Jewish?

>>1551335
>What does /biz/ think of subprime auto?

HELLS YEA NIGGAS!!! FREE MONEY LOANS BIATCH!!!

IMMA GET THOSE SPINNAZ FO REALS!!

>>1559813
Nope. I just have a low tolerance for scumbags. I uphold my end of deals as I'm required to. Anyone who doesn't deserves anything that happens to them.

I have the resources to ignore minor inconveniences in life, and hold those responsible accountable. Most of the time I barely have to do anything. For a lot of stuff, the laws are written such that those engaged in the shitty behavior have to pay court and legal fees. So what if I throw a thousand at a lawyer? I'll get it back. Most of those cases are contingency based because of this, so my out of pocket expenses are zero for legal counsel. It's just the short term inconvenience costs that I need to worry about. For those, I get to go in front of a judge and spin a tale with my lawyer about every single line item expense and minute that has been wasted as a result of my abhorrent treatment by Mr. Unethical.

Don't break the law. Don't be a shithead. Just because most people are willing to roll over and tolerate bullshit doesn't mean everyone else is. If you get into illegal/unethical behavior, you need to understand and accept that some days, a bigger fish is going to bite you back. If it's still profitable to break the law on average, that's a personal choice. Just don't expect to get away with everything. Accept it when you get caught, and move on. Choking on your pride over getting caught is just a poor business decision.

In the example above where I taunted the guy about selling the tracker, I was young, stupid, and petty. I wouldn't do that today. I'd just send the letter, maybe offer to sell him the device back at 1500 before auctioning it off, and call it a day. Let him twist and turn in the wind. No need to rub it in. They'll learn, or they won't. Not my problem to worry about one way or the other.

>>1559883
A true /biz/nessman

>>1558596
Most major banks have a hand in auto lending desu. If you're looking for subprime lenders I would think companies like Exeter, Santander, Ally, and Wells Fargo. Capital One also does a fair amount of subprime auto. I can't tell you who to short or if you should short at all since you really can't time the market.

I've been saying this the whole thread though, I don't think this is a catastrophic bubble or something, maybe just an expanding market about to experience a contraction.

I honestly can't tell you how a layperson would make money off of this or I'd be doing it too. The piece I know the least about is the securitizations and I feel like knowledge of the ABS market might give someone a better idea.

This thread is actually making me want to see if I can shadow with some of the folks who work in the securitization side of my company. My job involves more the monitoring of credit execution than corporate finance.

>>1558596
how about the one that keeps failing the federal stress tests

>>1559950
What's your job title, your education, and your prior work history?

Not too specific, of course. I just want to do something along the lines of what you do.

>>1558221
you take insurance out against instruments backed by loans that are bound to fail but everyone thinks is safe xD

>>1560378
My job role within my department is actually pretty different from what the rest of the department does. I deal more with analytics while they actually review accounts looking for poor credit execution(funding loans we shouldn't have, not obtaining proper stips, etc.) and for fraud.

I was able to get this job because of my statistics/math background in college (Econ major stats minor) and not because I had any relevant auto finance experience. I got this job upon graduation and actually didn't have much work experience. Any of the other people in my department though tend to have underwriting experience. Honestly I think starting as an underwriter is probably a great way for someone to really get to know the business. I think this could really be said for any financial services industry. Underwriting is what holds it all together.

File: big short .jpg (91KB, 250x390px) Image search: [Google]

91KB, 250x390px

>>1562430
pic related I suppose :^)

>>1562748
do underwriters get paid well? what kinda backgrounds r they?

>>1563013
I think generally depending on experience underwriters will make $40k-$60k a year, at least at my company. I know they get paid hourly so there's potential for overtime and they also get monthly bonuses based on their center's performance. If you're fresh out of college it's probably not a bad job.

I've met underwriters with various backgrounds. Whatever company hires you will teach you how to do it, it's just a matter of interviewing well.