Ford Abandon "Traditional Credit Scores" For Underwriting Decisions As Sales Stall

[suresh786]

30 minutes ago, oatbake said:

All that's missing is the securitisation of the loans and we're back in 2007...

Back to 1930 but hope not

Edited August 28, 2017 by suresh786

[Saving For a Space Ship]

 

I posted the quote below on the main hpc pcp car thread, from an auto loan expert on the long running piston heads thread   

I googled "negative equity loans" but could find nothing.  

Perhaps Fords meddling with credit scores is a form of these negative equity loans ? 

https://www.pistonheads.com/gassing/topic.asp?h=0&f=23&t=1662342&i

Quote

I have worked in the retail motor trade selling new and used cars with attendant F&I add-ons, plus a spell in commercial and fleet sales and have had deep misgivings about the rise and rise of PCP and latterly leasing and contract hire to consumers for most of the last ten years. 

The situations that customers bring to us daily and have done for a few years now, especially this last year or so are what I would personally consider "dire", were I in them. Yet the desire to change their car at a relative whim 18-24 months into their last (48 month) agreement, so currently in negative equity is unabated.

Manufacturer finance deposit contributions being used to over the negative equity, and now even separate, specifically designed negative equity loans - created to separate that last transaction from the present one (thus making the halves and thirds rules more easily applicable for the consumer later on) are very on the rise.

Are the wheels about to fall off? Possibly. More likely however that new financial instruments will be created by the manufacturer-owned and run banks/funding houses to maintain present sales volumes/market share etc. 

Personally, I'd favour a return to simply outright purchase or straightforward Hire Purchase as the options. But that would create a massive problem with the current parc and see the "premium" - mostly German big 3 brand retailers drop their UK volumes from 200k back to the 60-70k they were at 20 years ago and a return to the mainstream popularity of Ford/Vauxhall/Citroen/Renault etc. 

Conflict of morality, certainly. But I also have bills to pay and am only personally liable for one individual's financial decisions - my own. Don't think that we are all completely oblivious and uncaring. Most, maybe - but not all. 

Whilst it'd be short-term painful, I'd very much welcome a huge overhaul and better regulation of our industry, to protect consumer's financial wellbeing and dis-incentivise unhealthy/long-term unsustainable behaviours...

 

Edited August 28, 2017 by Saving For a Space Ship

[winkie]

Why should ford care if the debt is never repaid, they are in the business of selling cars..... without debt there would be few sold cars.

[TheCountOfNowhere]

20 hours ago, Saving For a Space Ship said:

  Ford To Abandon "Traditional Credit Scores" For Underwriting Decisions As Sales Stall

 http://www.zerohedge.com/news/2017-08-25/ford-credit-abandon-traditional-credit-scores-sales-stall-and-subprime-delinquencies

 

Double face palm

[anonguest]

1 hour ago, winkie said:

Why should ford care if the debt is never repaid, they are in the business of selling cars..... without debt there would be few sold cars.

It's a good point in a way - even though I suspect you are be facetious?

I'm no economist/financier but presumably there is a reasonable point here, and which underlies the bizzare nature of modern business? So long as Ford recoup enough money to cover development costs, productions costs, etc then perhaps yes....in this way the plates can be kept spinning for far longer than anyone would think possible?

[Option5]

2 minutes ago, anonguest said:

It's a good point in a way - even though I suspect you are be facetious?

I'm no economist/financier but presumably there is a reasonable point here, and which underlies the bizzare nature of modern business? So long as Ford recoup enough money to cover development costs, productions costs, etc then perhaps yes....in this way the plates can be kept spinning for far longer than anyone would think possible?

Development and tooling are a huge percentage of the manufacturers costs, especially as they are up front costs. If income falls they can always extend the life cycles of the models they have.

[Funn3r]

I bet you anything Ford think they are doing something wonderful. If they are anything like the company I work at then I expect ford's Head of Deep Business  Learning has already emailed all employees telling them that old credit score models are insufficiently "Digital" and he has formed an agile EMEIA-wide virtual team to implement the new strategy. (The new strategy of selling their products to people with no money) 

[Millaise]

2 hours ago, winkie said:

Why should ford care if the debt is never repaid, they are in the business of selling cars

I wonder whether you have just touched on a bigger picture to this that has been slowly and hazily revealed over the last ten years. Money is a claim on real goods and services. Demands for goods and services are not taking us to the limit of capacity, and we risk going in the other direction. Money in itself is useless and has to be spent. If we all had enough money, but didn't spend any, we would die. A penny spent by one person is  a penny earned by someone else. Spending must be kept up to keep up people's incomes,  to keep people in work and to prevent people dying. More money does not make us richer, unless it leads to increased production of goods and services. Magicing money into existence keeps up the production of goods and services, or increases it. Governments claim to think the opposite, that goods and services should be reduced to match the money available. The attractiveness of the UK to outsiders is in what it creates or can do, not in how much money it has. In the absence of political will, the car companies are acting like banks, and creating the money to keep up the production of goods and services (we have an aerospace manufacturer that has been paying customers to take its products for decades).  It would be better if the government created money for buying useful stuff as credit, rather than relying private individuals' loans to create it as debt, but at the moment, these companies are doing us all a favour. At some point, there will be a big debt write-off or jubilee, leaving the goods and services still in existence, and some enlightened government will go 'Ah, OK. It would have been kinder if we'd just created the money that was needed all along'

Edited August 28, 2017 by Millaise

[Fence]

11 hours ago, oatbake said:

All that's missing is the securitisation of the loans and we're back in 2007...

Bingo!  Beat me to it.

Sub prime may never repeat but surely rhymes - who am I kidding!  

Competition for the funniest form of securitization?

[shaunandelly]

11 hours ago, Saving For a Space Ship said:

 

I posted the quote below on the main hpc pcp car thread, from an auto loan expert on the long running piston heads thread   

I googled "negative equity loans" but could find nothing.  

Perhaps Fords meddling with credit scores is a form of these negative equity loans ? 

https://www.pistonheads.com/gassing/topic.asp?h=0&f=23&t=1662342&i

 

Half a car PCP leasing came in with Ford in 1991 in the UK. I was at the original training.It  was like dealing with the Church of Scientology.

[Blod]

19 hours ago, Saving For a Space Ship said:

I'm reminded of a story about Henry Ford ..

So , the modern equivalent is that car sales have slowed, so Ford sends his staff into the Twilight Zone scrap yard of the auto sub prime debt market.

They return and  Ford says .. ..

Make the 'Traditional Credit Scores' engineered to a lower specification

That sounds like how Tescos were alleged to have handled letters of compliment and thanks. If an area of their business received too many they would investigate to ensure they weren't 'overdelivering'.

[Saving For a Space Ship]

10 hours ago, shaunandelly said:

Half a car PCP leasing came in with Ford in 1991 in the UK. I was at the original training.It  was like dealing with the Church of Scientology.

 Huxleys' Brave New World did not use "The year of our Ford" for nothing

There was me thinking the soma of the people was Tv, but it's debt 

2.14m in ..

https://www.youtube.com/watch?v=rdw-EwPWLmg

[Saving For a Space Ship]

Broken window fallacy = desperation ?

 Ally Financial shares slip on concerns about its car loan exposure in hurricane Harvey-battered Texas  

http://www.marketwatch.com/story/ally-financial-shares-slip-on-concerns-about-its-car-loan-exposure-in-hurricane-harvey-battered-texas-2017-08-28

Quote

Shares of Ally Financial Inc. ally were slightly lower Monday, as investors awaited assessments of the company's exposure to hurricane Harvey, given that Texas is one of the bigger states in the U.S. auto market.

Texas is Ally's biggest state for retail auto loans, at about $9 billion of premiums, and commercial real estate, at about $650 million in premiums, according to research firm CreditSights, and it likely has big exposure in its $35 billion commercial loan book.

Ally and the broader original equipment maker markets may actually benefit from the storm damage, as natural disasters effectively lead to a spike in the scrappage rate, or percentage of vehicles of a certain type in a given age class that are retired from use in a give year. That will pull supply from the market and drive consumers back to the lot earlier than expected, said CreditSights analyst Jesse Rosenthal.

"There is precedence for this type of near-term tailwind, with used car prices bouncing in the wake of Sandy and Katrina, and could be a boost for the beaten-down industry in coming months," said Rosenthal. Ally shares have gained 19% in 2017, while the S&P 500 spx has gained 9%.

 

Edited August 30, 2017 by Saving For a Space Ship

[Freki]

Zombie companies, will they be rescued again?