One Third Of New Car Loans Aren't Worth The Paper They Are Written On

A growing share of the trade-ins that U.S. auto dealers and lenders accept for car-purchase financing are worthless on paper, a sign that banks and finance companies are making riskier loans to keep up revenue as vehicle sales slow.

Almost a third of cars traded in last year were worth less than the loans that had been financing them, according to car-shopping website Edmunds. That’s up from about a quarter a decade earlier, said Edmunds, which looked at cars traded in as part of financing packages for new auto purchases in the U.S.

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TheSteve - 1/26/2018 3:42:18 PM

+4 Boost

Remember the subprime fiasco? We depended on Financial Giga Corporations to do the right thing. The didn't. Is anyone surprised? So the Fed threw billions of (borrowed) dollars at select financial corporations to bail them out.

The feds then wanted to put in new laws that would prevent this sort of thing from repeating. They're called "regulations". Some politicians feel regulations are bad, so they opposed it. A new, watered-down law was put in effect, in the hope that it would slow down, and maybe prevent a repeat of the financial subprime meltdown.

In the past year, the feds struck down that law. They feel regulations are bad. They believe that Giga Corporations, left to their own devices, will do the right thing. They have short memories. They also believe that unregulated consumers will do the right thing. Again, they have short memories.

So today, we once again see Financial Giga Corporations engaged in questionable practices of lending other people's (investors') money, to borrowers who don't have the assets to secure the loan, and who might not be able to pay it back. We have borrowers (consumers) who take the deal that's offered to them, possibly knowing they won't or can't repay the loan, or possibly not even thinking that far ahead, not managing their finances so they can repay their debts in a timely manner.

When the house of cards crumbles, we will once again be puzzled: How could this have possibly happened? And the Feds will throw billions of (borrowed) dollars at select Financial Giga Corporations to bail them out. Meanwhile, the taxpayers are left holding the bag. Politicians and voters have short memories.

MDarringer - 1/27/2018 6:32:37 PM

0 Boost

Wanna hear a fun one, Stevie?

Some of these risky loans are contingent on the buyer trading in a car. I know of a local dealer that keeps junkers around to sell to the customer so as to have a trade in. If that doesn't take the cake for shady dealing, nothing does.