[quote=svelte][quote=flu]
Hey, what do you expect? A lot of car companies like GM/Chrysler are doing this very game right now..Offering 84-96+ new car loans and getting back into the subprime lending business full throttle How else do you think they are padding their sales numbers?
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December 2012 stats.
Average credit score on new car purchases by make.
“General Motors has the highest auto loan delinquency rate in the industry due to its increasing reliance on subprime customers, a fact some experts fear could lead to a bubble like the one that wrecked the housing market in 2007 and produced the Great Recession of 2008.
At the same time, however, JD Power, one of the auto industry’s most respected forecasters, sees 2013 sales headed to 15.3 million units, the highest level in years.
“High production costs and falling profit-per-car have led auto manufacturers to turn to financing to earn higher profits. Automakers have capitalized on lending by not only loaning money to customers but also packaging and selling those loans to investors in a manner similar to the sale of mortgage-backed securities that created the housing bubble,” according to the Washington Free Beacon’s Bill McMorris.
“The dramatic increase in securitization has coincided with GM’s acquisition of AmeriCredit, one of the nation’s largest subprime auto lenders, which it renamed GM Financial (GMF),” McMorris said.”
“And just like the 2008 mortgage crisis, these sub-prime auto loans are being packaged and sold as AAA rated bonds. As the Los Angeles Times reports, the number of loans packaged and sold as a securities is in the tens of thousands. The thinking goes that even if some of the loans are delinquent, there are plenty more that will make the security safe. And like sub-prime mortgages, the securitized auto loans are being divided up into tranches, with demand for the riskiest tranches being strongest.
Unfortunately for American consumers, the biggest players in sub-prime auto financing have significant ties to domestic auto makers. A report by Reuters names Santander, which is Chrysler’s auto financing outlet, and GM Financial as the two largest sub-prime auto lenders in the United States. Santander alone accounted for 53 percent of all sub-prime financing – and Santander’s expertise in the field was apparently one reason that Chrysler decided to partner with the Spanish bank.
While both Chrysler and GM use Ally Financial for their prime loans (which are issued to qualified buyers), GM has its own seperate sub-prime arm, known as GM Financial. In Q1 2012, some 93 percent of GM Financial’s loans were to sub-prime buyers, up from 87 percent in Q4 2010. During that same period, loans to the least qualified buyers – those with FICO scores under 540, were up 79 percent. GM Financial’s delinquent loans also rose by some $200 million in 2012, to $933 million – higher than Ford Toyota and Honda’s combined delinquencies.
