The loans were for used Dodges, Nissans and Chevrolets, many with tens of thousands of miles on the odometer, some more than a decade old.
They were also one of the hottest investments around.
So many asset managers clamored for a piece of a September bond deal made up of these loans that the size of the offering was increased 35 percent, to $1.35 billion. Even then, Santander Consumer USA received more than $1 billion in investor demand that it could not accommodate.
Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.
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4 comments:
The car store / truck store is the absolutely worst place that preys on the poor. 25% interest rates. It should be against the law.
D&C doesn't charge interest that I am aware of,but any money you save will be spent on repair costs.
It used to be against the law, then the less regulations crowd took over. Now anything goes.
The "Buy Here, Pay Here" auto sales are the most predatory. "No Credit, No Problem", "Everybody Is Approved" Then they give the sub prime borrowers 7 years to pay on a 10 year old car with a GPS tracking device on it so that they can come get it after you miss one week of payments (yes, they require weekly payments so that their clientele can afford the payments HaHa!), and then re-sell the same car to another vulnerable buyer in need of transportation. Goes on every day right here on the shore. Their ads are on TV. And the businesses seem to be thriving....Duh!
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