Option5 Posted July 27, 2017 Share Posted July 27, 2017 In the US they found that the last thing people stop paying is the car payment, first is the house payment. I suppose it's because repossessing a house takes longer. No matter, they can always rely on a lottery win...................... Quote Link to comment Share on other sites More sharing options...
Ah-so Posted July 27, 2017 Share Posted July 27, 2017 1 hour ago, Democorruptcy said: BoE in 2006: Mervyn King, the Governor of the Bank of England, has issued a stern warning to anybody thinking of taking on a hefty mortgage or further credit card debt. The Bank said household debt had doubled since 1999, reaching 150 per cent of people's post-tax income. Over a third of families said debts had become a "burden". "All lenders and all borrowers should think very carefully before they either lend or borrow," Mr King said yesterday, delivering the Bank's quarterly inflation report. His comments come after Abbey revealed that it would offer borrowers five times their income to buy a home, while HBOS, one of the big four banks, was offering a 125 per cent mortgage. http://www.telegraph.co.uk/news/uknews/1534268/Bank-warns-against-further-borrowing.html Good find, but the article does show that concerns were still quite modest: "It's very serious for them. It's a real social problem but it's not large enough to constitute a major threat to consumer spending," he said. Hardly a prediction of the coming financial crisis! The BOE is also a much stronger beast today - combined with the PRA and with new regulatory powers. I think this new approach allowed it to identify and call the risk in consumer spending. Quote Link to comment Share on other sites More sharing options...
Saving For a Space Ship Posted July 29, 2017 Share Posted July 29, 2017 (edited) The PCP V.I's fight back ... Franchised dealers defend PCP car finance deals from media attacks www.am-online.com/news/finance/2017/07/25/franchised-dealers-defend-pcp-car-finance-deals-from-media-attacks Things go from bad to worse in the US Wells Fargo charged 570,000 customers for auto insurance they didn’t need https://www.washingtonpost.com/news/business/wp/2017/07/28/wells-fargo-charged-570000-customers-for-auto-insurance-they-didnt-need-potentially-forced-some-to-have-cars-repossessed/ Wells Fargo Forced Unwanted Auto Insurance on Borrowers https://www.nytimes.com/2017/07/27/business/wells-fargo-unwanted-auto-insurance.html Quote The expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions, according to the 60-page report, which was obtained by The New York Times. Among the Wells Fargo customers hurt by the practice were military service members on active duty. Wells Fargo, one of the largest banks in the United States, is struggling to repair its image after a scandal in which its employees created millions of credit card and bank accounts that customers had never requested. That crisis, which came to a head last year, toppled Wells Fargo’s chief executive and led to millions of dollars in fines. The bank also stands accused of having made improper adjustments to the terms of the home loans of customers who were in bankruptcy, which Wells Fargo denies. Edited July 29, 2017 by Saving For a Space Ship Quote Link to comment Share on other sites More sharing options...
Calcutta Posted July 30, 2017 Share Posted July 30, 2017 http://www.dailymail.co.uk/debate/article-4743244/PETER-HITCHENS-Car-finance.html Apologies for the Daily Fail link, but a lot of people are waking up to this in their Sunday paper. Can't be much clearer than this... "Just after the last crash, in November 2008, the Queen asked a roomful of academics and economists why they hadn’t seen it coming. She won’t have to do that next time. This week the klaxons started to sound. Another crash is on the way. And so if you wake up one morning and the cashpoint machines are empty, and there are long, angry queues outside famous high street banks, you, the Queen and the Government will have no excuse for being surprised." Quote Link to comment Share on other sites More sharing options...
Barnsey Posted July 30, 2017 Share Posted July 30, 2017 (edited) 1 hour ago, Calcutta said: http://www.dailymail.co.uk/debate/article-4743244/PETER-HITCHENS-Car-finance.html Apologies for the Daily Fail link, but a lot of people are waking up to this in their Sunday paper. Can't be much clearer than this... "Just after the last crash, in November 2008, the Queen asked a roomful of academics and economists why they hadn’t seen it coming. She won’t have to do that next time. This week the klaxons started to sound. Another crash is on the way. And so if you wake up one morning and the cashpoint machines are empty, and there are long, angry queues outside famous high street banks, you, the Queen and the Government will have no excuse for being surprised." 4th article down on front page, the masses can't miss it Edited July 30, 2017 by Barnsey Quote Link to comment Share on other sites More sharing options...
Calcutta Posted July 30, 2017 Share Posted July 30, 2017 The Guardian are running a nice article about everybody in Corby being in debt, it's all over my fakebook this morning. This is, everyone can see the cracks in the dam now. Looks like I'm going to spend my Sunday explaining to the kids why they're riding out of Asda on a trolley full of spam. Quote Link to comment Share on other sites More sharing options...
spyguy Posted July 30, 2017 Share Posted July 30, 2017 1 hour ago, Calcutta said: http://www.dailymail.co.uk/debate/article-4743244/PETER-HITCHENS-Car-finance.html Apologies for the Daily Fail link, but a lot of people are waking up to this in their Sunday paper. Can't be much clearer than this... "Just after the last crash, in November 2008, the Queen asked a roomful of academics and economists why they hadn’t seen it coming. She won’t have to do that next time. This week the klaxons started to sound. Another crash is on the way. And so if you wake up one morning and the cashpoint machines are empty, and there are long, angry queues outside famous high street banks, you, the Queen and the Government will have no excuse for being surprised." The only bit of pcp im not 100% on is who eats the loss between the resale estimate and actual. Other than that, its just a dumb way to own the depriation of a car that someone else owns. The problem debt, as well as sone seriuousl high mortgage debt still kicking around, is the aggregate credit card, store card , personal loans. Ive chatted to uite a few oeople who, when you add it up, are carrying about 2 x their income in unsecured debt. Quote Link to comment Share on other sites More sharing options...
Lord D'arcy Pew Posted July 30, 2017 Share Posted July 30, 2017 The wealth many people believe in will vanish very quickly. Debt is a promise to pay, but many of these promises will not be kept. Our debt based economy has been writing out cheques that will bounce. Too many lies make the promises worthless. Massive wealth destruction is on the way. Quote Link to comment Share on other sites More sharing options...
darkmarket Posted July 30, 2017 Share Posted July 30, 2017 (edited) 2 hours ago, spyguy said: The only bit of pcp im not 100% on is who eats the loss between the resale estimate and actual. This is the key to the systemic risk presented by this business model. Here's an example of how an investor is handling that risk following the BoE warnings: Quote From the perspective of credit ratings for Asset-Backed Securities (ABS) transactions for auto loans or leases, ARC will incorporate the increase in the Residual Value (RV) risk into its analysis, notably in the review of originator’s RV setting policy, and therefore ARC may increase stresses applied to quantitative analysis to ensure that the level of credit enhancement in the structure is adequate for the increased RV risk. http://www.arcratings.com/uk/noticia/217 Ratings agencies are currently offering triple-A on these securities: Quote The ratings giants, Standard & Poor’s and Moody’s, have given most of these batches of loans a triple-A safety rating. Multiple banks will be involved in any “auto loan ABS” (asset-backed security). For example, a £1.3bn securitised package of UK loans issued by PSA Finance, an arm of Peugeot cars, included HSBC, Lloyds, San Francisco-based Wells Fargo and France’s BNP Paribas. https://www.theguardian.com/money/2017/feb/10/are-car-loans-driving-us-towards-the-next-financial-crash That Guardian article also provides an answer to your question: Quote Should an auto asset-backed security collapse, it is likely that the pain will fall mostly on the car manufacturers who stand behind their multibillion-pound leasing arms. But this may not be true. Car manufacturers these days include financial institutions within their corporate group structure. Those financial institutions are issuing one of the main class of corporate bond already being purchased by the Bank of England. This cheap money encourages more cheap debt, much of which could be junk that'll never be repaid in the event of debt not rolling over and a big drop in residual values. I can't find any figures on the total size of the PCP-based asset-backed security market in the UK, but that's more significant than the risk presented by the contracts themselves. Recall that people don't need to actually default on their PCP, it's sufficient that the security market loses confidence in them. Taxpayers could well be on the hook if there's contagion and / or calls to save too-big-to-fail companies or the underlying industry. AFAIK it's not possible to sell securities based on a mixture of underlying assets like cars and housing, but you can imagine how contagion could feed through to the housing market in other ways. Edited July 30, 2017 by darkmarket format Quote Link to comment Share on other sites More sharing options...
spyguy Posted July 30, 2017 Share Posted July 30, 2017 Oh ive read the blurb. Its use of the word likely rather than will that worries. In fact the world would be best to avoid any new financial model that gets ramped up before being tested in a few real world economic cycles. Quote Link to comment Share on other sites More sharing options...
spyguy Posted July 30, 2017 Share Posted July 30, 2017 (edited) End of the day, when risk is being spliced and diced its always the dumbest who end up holding it rather than the best capitalised. Hello BoE. Edited July 30, 2017 by spyguy Quote Link to comment Share on other sites More sharing options...
Lambie Posted July 30, 2017 Share Posted July 30, 2017 (edited) 3 hours ago, Barnsey said: 4th article down on front page, the masses can't miss it I fear you are overestimating the ability of the average Daily Mail reader to count to more than 3. Edited July 30, 2017 by Lambie Quote Link to comment Share on other sites More sharing options...
Gigantic Purple Slug Posted July 30, 2017 Share Posted July 30, 2017 On 7/27/2017 at 7:50 PM, Option5 said: In the US they found that the last thing people stop paying is the car payment, first is the house payment. I suppose it's because repossessing a house takes longer. No matter, they can always rely on a lottery win...................... I don't know for sure, but I think it is far easier to exit a mortgage in the US than the UK - you hand the keys in and exit. The US is not well organised in terms of public transport and is much more spread out than the UK. If it is that easy to exit a mortgage the strategy would probably be pile your best/most valuable stuff in the car and just drive off to find a new job. Without the car you would have nowhere to store your most valuable stuff and no way of driving around to find new work. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted July 30, 2017 Share Posted July 30, 2017 4 minutes ago, spyguy said: Oh ive read the blurb. Its use of the word likely rather than will that worries. In fact the world would be best to avoid any new financial model that gets ramped up before being tested in a few real world economic cycles. So true. Financial markets are just too stochastic to model reliably. The best that quantitive methods can do is generate a few fleeting, transient signals from the noise. Even Steve Keen's belief that the macroeconomy is chaotically nonlinear is an opinion, since there have been only a dozen or so macro cycles since WWII, far too few data points to establish the matter beyond conjecture. Quote Link to comment Share on other sites More sharing options...
darkmarket Posted July 30, 2017 Share Posted July 30, 2017 17 minutes ago, spyguy said: Its use of the word likely rather than will that worries. I guess it's safe to say it's either the car financial companies or the taxpayer. I could imagine a form of state support that allowed for the balloon payments to be spread over a longer term with a similar facility for the lender to cover the falls in residual values, and maybe mass purchases of used cars or other ways to prevent them flooding the market and crashing the residual values in the first place. Then government can step in and artificially stimulate demand with more regulations and incentive schemes for electric cars. Quote Link to comment Share on other sites More sharing options...
spyguy Posted July 30, 2017 Share Posted July 30, 2017 3 minutes ago, Gigantic Purple Slug said: I don't know for sure, but I think it is far easier to exit a mortgage in the US than the UK - you hand the keys in and exit. The US is not well organised in terms of public transport and is much more spread out than the UK. If it is that easy to exit a mortgage the strategy would probably be pile your best/most valuable stuff in the car and just drive off to find a new job. Without the car you would have nowhere to store your most valuable stuff and no way of driving around to find new work. California and Flotida have much warmer climates. Sleeping in a car, which may be more mobile home that fiat500 - is doable. I work with someone who lives in a motorhome in Calif. He has a house out in the sticks but lives in his motorhime tue to thurs. Showers in the office. In days of interweb, lcd screens, kindles etc, it works well for him. His family are happy as they dont have to live in the city. Quote Link to comment Share on other sites More sharing options...
Toast Posted July 30, 2017 Share Posted July 30, 2017 47 minutes ago, darkmarket said: I guess it's safe to say it's either the car financial companies or the taxpayer. I could imagine a form of state support that allowed for the balloon payments to be spread over a longer term with a similar facility for the lender to cover the falls in residual values, and maybe mass purchases of used cars or other ways to prevent them flooding the market and crashing the residual values in the first place. Then government can step in and artificially stimulate demand with more regulations and incentive schemes for electric cars. Why don't they just cut to the chase and and make it legal for anyone to trade while insolvent? /s Quote Link to comment Share on other sites More sharing options...
Blod Posted July 31, 2017 Share Posted July 31, 2017 17 hours ago, Toast said: Why don't they just cut to the chase and and make it legal for anyone to trade while insolvent? /s Haha, the whole stinking mess is insolvent but still grinding on. Quote Link to comment Share on other sites More sharing options...
winkie Posted July 31, 2017 Share Posted July 31, 2017 (edited) Edited July 31, 2017 by winkie See below Quote Link to comment Share on other sites More sharing options...
winkie Posted July 31, 2017 Share Posted July 31, 2017 21 hours ago, Lord D'arcy Pew said: The wealth many people believe in will vanish very quickly. Debt is a promise to pay, but many of these promises will not be kept. Our debt based economy has been writing out cheques that will bounce. Too many lies make the promises worthless. Massive wealth destruction is on the way. Wish I could think you are wrong, but I believe you are more right than wrong. Quote Link to comment Share on other sites More sharing options...
Saving For a Space Ship Posted August 1, 2017 Share Posted August 1, 2017 (edited) Financial regulator set to crackdown on unarranged overdrafts and car loans https://www.themoneypages.com/latest-news/financial-regulator-set-crackdown-unarranged-overdrafts-car-loans/ Quote The regulator also raised concerns the motor finance market, where lending has increased by 15% in the past year... ..“In particular, the nature and extent of the problems that we have found with unarranged overdrafts mean that maintaining the status quo is not an option. We are now working to resolve these issues while preserving the parts of the market that consumers find useful.” The FCA will also consult on action to address concerns in the rent-to-own, home-collected credit and catalogue credit sectors.... Outlook darkens for UK debt collateral Moody’s stance turns negative on loans bundled into asset-backed securities https://www.ft.com/content/155fa67e-75f3-11e7-90c0-90a9d1bc9691 Quote Moody’s has raised the alarm over a wide range of UK consumer loans that are bundled together and sold to institutional investors.... Auto loans, credit cards, buy-to-let mortgages and so-called “non-conforming” mortgages.. https://www.pistonheads.com/gassing/topic.asp?h=0&f=23&t=1662342&i Pistonheads discussion on it Us probs .. Subprime Auto Loan Defaults on the Rise (VID) Quote Bill Black (Financial market investigator legend) the white collar criminologist says It is a very severe problem for consumers who are going to lose not only their cars, but their credit ratings http:// therealnews.com/t2/story:19641:Subprime-Auto-Loan-Defaults-on-the-Rise Edited August 1, 2017 by Saving For a Space Ship Quote Link to comment Share on other sites More sharing options...
Saving For a Space Ship Posted August 2, 2017 Share Posted August 2, 2017 The UK car business has 'exactly the same problems' as the mortgage market 10 years ago ... (turn adblock off to read) http://uk.businessinsider.com/uk-car-finance-pcp-mortgage-market-morgan-stanley-2017-7 Quote ...He believes the current state of car credit in the UK — £41 billion ($54 billion) in loans last year — is unsustainable. The reason: car finance companies are allowing drivers to buy vehicles using a consumer debt product which requires car dealerships to take cars back if their owners decide they don't want them anymore. Almost all the risk in these transactions is carried by the car finance company, not the consumer. There is virtually no other consumer credit product which allows borrowers to simply walk away from an asset unpenalized if they don't want to pay for it anymore. The scenario — of cash-strapped consumers handing back their keys with almost no downside — might bring back memories of the 2008 housing crash in the US, and a concept called "jingle-mail." In the depths of that recession, mortgage bankers experienced an avalanche of envelopes from former customers that jingled when they were delivered. American homeowners who couldn't afford their mortgage payments and couldn't sell their houses simply mailed their house keys back to the bank and walked away. The houses then became the bank's problem... ..This has never been tested in a recessionary market There is an obvious problem with all of this: It only works as long as the dealer/finance company has correctly estimated the second-hand value of the car three years from now. If the market heads south — due to a recession, an unexpected glut of used vehicles, or Brexit — and the market values are less than the GFMV, then everyone is in trouble. Drivers are left owing more than their cars are worth; dealers are likely to get stuck with cars whose value is less than the price they need to make a profit... Quote Link to comment Share on other sites More sharing options...
Saving For a Space Ship Posted August 5, 2017 Share Posted August 5, 2017 (edited) "Reports that Amazon had begun hiring people from the motor retail sector to explore selling cars online" http://www.am-online.com/opinion/2017/07/25/from-amazon-to-westminster-car-dealers-have-had-enough-of-change-for-now Quote Yes. The serious risk is that the bond holder is leveraged so their 10% bond value hit transpires to be a 100-200% hit. Their lender gives them a margin call and they default, thus the counter party carries the loss. Enough of that and the counter parties then start to struggle to handle the losses. The risk to manufacturers is that a sudden change in bond pricing could be a toxic shock to their business model that sees them unable to react quickly enough to pass the cost down the line to the consumer or for the consumers to stop buying their credit. The balance sheets of the manufacturers are not exactly robust. They are all heavily laden with debt, the cost of which would likely be raised to reflect their weaker economic status etc. The other issue for manufacturers is that having converted the entire retail consumer action into monthly debt consumption and quick rise in retail financing costs would arguably see huge and rapid changes in what the consumers are purchasing with their fixed monthly packages. Such changes would almost certainly occur quicker than a manufacturer could change its direction. For example, will consumers keep buying the same model of car but drop all the options or drop down the model range or move to cheaper brands. Any of those changes present a very big hit to manufacturers if they happen quicker than they can react. The key thing is that consumer debt has been put on the tabloid front pages and on the desk of the regulators before it is a very serious risk and so now we just need to see if there is a response or if it is ignored. What we do know is that consumers cannot self regulate so they will keep consuming until they implode or the system implodes around them so it must be the lenders who must be steered and the bond holders so that whatever happens it is not another problem for the taxpayer to fund. “Peak Auto” is Finally Here https://dailyreckoning.com/peak-auto-finally/ Crashing Auto Sales Reflect Onset Of Debt Armageddoninvestmentresearchdynamics.com/crashing-auto-sales-reflects-onset-of-debt-armageddon/ Edited August 5, 2017 by Saving For a Space Ship Quote Link to comment Share on other sites More sharing options...
anonguest Posted August 6, 2017 Share Posted August 6, 2017 On 27/07/2017 at 7:50 PM, Option5 said: In the US they found that the last thing people stop paying is the car payment, first is the house payment. I suppose it's because repossessing a house takes longer. No matter, they can always rely on a lottery win...................... Also because most Americans need their car to get to work? as opposed to Brits who can, in larger numbers, use public transport? Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 6, 2017 Share Posted August 6, 2017 22 hours ago, Saving For a Space Ship said: Such changes would almost certainly occur quicker than a manufacturer could change its direction. Car manufacurers work on a very efficient "just in time" stock delivery model. If people stop buying cars or shift down the range the manufacturers will change their ordering patterns, It could be that the sub suppliers will be the biggest losers. It's also very expensive to develop a new model or to upgrade an existing model, if times get hard just prolong the models life, at least until the tooling wears out. Reducing options and making cars more standard also helps, it can be cheaper to make some popular options standard so you don't have to build a special for some awkward git like me who doesn't want parking sensors etc. I see the top badge manufacturers being the hardest hit, people will still "need" cars so will have to buy what they can afford, or be allowed to borrow for. I predict more high end cars on private number plates to hide their age trundling around the suburbs. Quote Link to comment Share on other sites More sharing options...
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