Very interesting Twitter thread from guy in the business
Background:
Over the past 2 years, many people took out exorbitant loans on cars.
Car values were inflated (and frankly, still are to some extent).
But many people simply had no choice and bought an overpriced a car.
Well…
— CarDealershipGuy (@GuyDealership) December 16, 2022
But there is no easy solution.
You can't just put the genie back in the bottle.
This brings me to what happened this morning:
— CarDealershipGuy (@GuyDealership) December 16, 2022
1) Consumer takes out an auto loan in 2020/2021 on an overvalued car
2) 2022 comes around and that overvalued car is now rapidly declining in value
3) With the car declining in value, consumer now owes more on the car than it is worth
— CarDealershipGuy (@GuyDealership) December 16, 2022
6) But of course, the consumer doesn't have $1,000s to cover the difference between what they owe on the car and what it's worth.
And here comes the perfect storm…
— CarDealershipGuy (@GuyDealership) December 16, 2022
8) Lender knows that most consumers are stuck in this situation, and does the following:
WAIVES THE OPEN AUTO STIPULATION.
Meaning, the lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!
Why the f*ck would they do this?
— CarDealershipGuy (@GuyDealership) December 16, 2022
This is NOT normal.
But it's the only way lenders can finance cars and dealers can put cars on the road.
And the implications of this will be tons of repossessions.
— CarDealershipGuy (@GuyDealership) December 16, 2022
This morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending.
I’m now convinced that there is a massive wave of car repossessions coming in 2023.
Here’s what I discovered (and what no one knows):
h/t Redacted Dodger007