This reflects my seat of the pants inventory.....
Originally Posted by KingNothing
This reflects my seat of the pants inventory.....
You're repeating datapoints I've already debunked. The uptrend in car sales has little to do with natural disasters, dude. I've already said you should look at October sales and see how October sales were actually lower because of the storm. No one thinks "hey, a hurricane is coming, this is a great time to buy a car!"
Americans are confident in economic recovery, and as such they are buying a car. I know this doesn't fit your ideal scenario - a poorly performing economy and weak consumer - but reality is that consumer confidence is at a four year high (discussed in another thread) and car sales are booming. Get with the times.
Total inventory is useless. Days inventory is more important. Compare that chart to the change in car sales and you'll see why dealerships have more total inventory - it's because they're selling more per day. Research I have on hand says that there is only 13 days more inventory on the lots today than this time last year for all Big 3 automakers, and 15 days more inventory for all automakers on American lots. Days inventory is a derivative of the sales pace. Given that the trajectory is up, I'm not surprised to see that there is more total inventory, as well as more days of inventory (which is calculated against the last month's sales pace, not future projections.) When sales come in at automakers expectations, there will be no inventory build at all.
There are 73 days of inventory for all cars and light trucks on American lots. That's hardly a lot of supply. Also, seeing as sales are increasing fairly regularly, we should only expect more inventory on the lots ahead of stronger automotive demand.
Your comment reflects inability to engage in critical thinking and honest, real discussion about the state of auto sales.
Last edited by Jordan; 12-03-2012 at 01:16 PM.
Whatever that means. Hard data? Source? All makes, years and models have different rates of depreciation, and I can pretty much guarantee that you don't have any hard data that compares overall (real) depreciation rates in any way that is meaningful at all. And I don't mean IRS limits, either. You don't know the real depreciation of any car until is resold or otherwise disposed of, and the used car market everywhere offers the same substantial discounts for the fact that a car is used, that never went away.
The one fundamental that also hasn't changed at all is that the cars that have the lowest depreciation rates are the ones with the highest sticker prices. Pretty much a rule of thumb, really. And those kinds of cars are not typically the target supply for subprime lending. And out of the non-luxury cars you see that do have remarkably low depreciation rates, like a Prius or a Mini Cooper, good luck finding many of those on that "strong" used market of yours.
You have some very naive ideas about how that all works. It's not a case of I sell to you, you don't pay, so I repossess and sell it to someone else instead. There are costs, risks, and time involved in capturing all of that cost. Finance companies who are on the hook for a loan of a new car that got repossessed--they aren't capturing that difference upon resale. Repossessed car loans are sold to others at a discount, with cars that are typically sold to used car dealers at auction. So someone is certainly benefiting from those defaults, but it's not the original lender who was defaulted on. They cut their losses and take their haircuts upfront, with the idea that Sure-Fast-Nickel beats an IFFY slow dime any day.2. The used car market is strong, meaning that if there are defaults those cars can be quickly recovered and sold.
As for the overall strength of the used car market, that's the biggest irony of all, because you're failing to see that the used car market shares a lot of the same sub-prime financing channels as the new car market!
True, but a non-sequitur that has more to do with personal advantages of buying new, and very little to do with why "virtually anyone" can qualify for car purchases.3. MPG improvements significantly reduce the long-run cost of owning a current model car.
Nice fuzzy usage of the word anecdotal. My stories about people I personally know who can't get financing for other-than-cars, but can get financing for cars-and-cars-only, that was anecdotal. Not the articles. You might question their accuracy, relevance or even the underlying numbers, but those weren't anecdotal at all.At any rate, you've given me an anecdote that suggests subprime borrowers are pushing car sales up. No hard data, though.
FOR EXAMPLE: "...even consumers with the worst Vantage scores -- F-level borrowers -- are getting access to auto loans with an average balance of $15,300..." - Experian-Oliver Wyman Market Intelligence Report
That is a reference to hard data, and not anecdotal at all. Unless anything that is not a direct table, chart or graph counts as "anecdotal" to you.
Nice attempt at moving the goalposts, but you're obviously not reading. The article I cited already stated that Capital One, Banco Santander and General Motors Financial all have been reducing their FICO minimums. You might consider those anecdotal, but assuming the article is not doing any outright fabricating, it qualitatively establishes that there is in fact a percentage change, whatever that is. The mere fact that FICO minimums are being reduced at all is prove positive that the number of car sales are increasingly subprime from the past until now, with a declining credit quality of borrowers--deliberately--because that's who they are reaching out to more and more.Got any sources on what percentage of car sales are subprime and how that differs from 1, 2, 5, years ago? No? Of course not! Because the credit quality of borrowers has not changed significantly, and companies like Credit Acceptance Corp have been making subprime loans for years.
And here's the Big Elephant in the room you are not paying attention to: with the exception of modest downpayments, almost none of these cars are being purchased with savings. They are all, for the most part, DEBT PURCHASES. AKA=not payments, but rather future promises to pay. Future expectations, just like the housing market. We really don't know how well the market did until they all actually PAY their debts. Until then, what we do know, and the part you ignored, dismissing as anecdotal, is the increasing number of losses among securitized pools of subprime car loans:
See that? Real numbers.For many subprime auto lenders, access to warehouse financing automatically begins to shut down when losses reach 8-10%. According to an index maintained by Fitch, average annual losses among securitized pools of subprime car loans have climbed for five straight months, from an average of 3.76% in May to 6.44% in October — a trajectory that worries many industry professionals.
Yeah, I confess now to having told people similar shit about the "reality" of a booming housing market that was leveraged to the gills by an increasingly subprime lending market. Even laughed at a few doom-and-gloomers on occasion. I knew the market was in a bubble, but boy did it look like a strong bubble. I mean, get real, how does something that big and encouraging pop anyway?
Good luck with your faux-optimism, Jordan.
Yes there is data depreciation of used cars. See the Manheim Used Vehicle Value Index.
Any increase in the level of used car prices makes it possible for lenders to lend to people with poorer credit due to securitization. Yes, there are costs, but they are largely fixed when we talk about repossessions. Therefore, if a used car that might be worth $6000 repo'd in 2006 is worth $9,000 today, there are quite a few more loans that will perform when loan recovery is taken into consideration.
Obviously lenders who want to increase their market share are lowering their FICO minimums. You seem to imply that you're surprised FICO minimums are going down but FICO maximums aren't going up? WTF is a lender going to do - say, "oh, hey we'll take 800+ people now since we didn't before?" I mean seriously? Again, you haven't demonstrated that the makeup of the car buyer is changing. Rather, you've said simply that banks are willing to make loans to people they wouldn't before. Cool; that says nothing about the actual change in car buyers.
Subprime, as measured by credit score, is a really piss poor way to measure the subprime market. I would venture to guess that subprime borrowers today are vastly better financed as far as debt-to-income ratios than subprime borowers in 2002-2006. Your credit score doesn't mean anything insofar as your ability to repay, hence why credit scores are relatively unimportant in mortgage lending - what you earn and what you spend are far more important. If you have a bad credit score today, it's probably because of a job loss and late payments in 2008. If you had a bad credit score in 2002-2007, you were just a deadbeat. Given that debt servicing costs continue to fall, Americans have much more cash flow today than a few years ago, regardless of their credit history from the bust years.
I'd be interested to have long-term data on that Fitch index. There are several as it relates to cars. I could pick and choose a datapoint from September 2012:
No change year over year? Aha - seasonality. Yep, car defaults are seasonal.The subprime sector also exhibited stable performance this past month. 60+ days delinquencies rose to 3.24% from 3.17%, only a 2% increase MOM. The stability in this sector has been driven largely by 2010-2012 subprime deals, which have been subject to stronger underwriting standards than weaker 2007-2009 vintages that have mostly paid down.
Subprime ANL increased to 5.32% in August from 4.74%, a 12% increase MOM but showing no change YOY.
From the October release:
http://www.businesswire.com/news/hom...Drop-U.S.-AutoOctober annualized net losses (ANL) improved YOY for both prime and subprime sectors, while losses ticked up MOM. Prime ANL rose to 0.34%, 40% improved YOY but up 21% MOM, while subprime ANL improved 7% YOY, yet increased 14% MOM.
Honest real discussion is what I can lay my hands on not some numbers released by a bean-counter I've never met.
As for "critical thinking" you go right ahead and think away buddy, I'll keep working making things I can touch that'll be around after I die...
Critical thinking and honest discussion............Hogwash!
I still didn't get an answer to my original question about the WSJ article that this thread was based on. I dont have a WSJ subbie so I can't read the article. So I'll ask again.
Jordan, what is the metric used by the article to claim that auto sales are up? Is it actual end user purchases or is it based on the numbers of cars being shipped from manufacturer to dealer only? You posted the article but I can't read it so I'd like you to clear this question up. Which metric is being used has a large impact on whether the claim is based on anything other than channel stuffing.
Fwiw, my credit union has been bombarding me with solid offers to buy a new car ($35k loan, 3.4% for 60 months). The catch is that I just paid off a $30k loan to them for my last car so they just want me to get back into debt with them instead of sticking with my paid off ride. They're offering me a loan because I have GOOD credit history.
Last edited by devil21; 12-03-2012 at 04:42 PM.
"Let it not be said that we did nothing." - Ron Paul
"Always give your best, never get discouraged, never be petty; always remember, others may hate you, but those who hate you don't win unless you hate them, and then you destroy yourself. " - Nixon
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http://www.ronpaulforums.com/showthread.php?t=218093
No anti-semitism, just logic.
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You go consult it, and tell me how to compare the depreciation values of all those UNLIKE THINGS from year to year. Be sure to include your methodology.
Increase in the level of used car prices relative to what? Did you mean lower depreciation? That made no sense.Any increase in the level of used car prices makes it possible for lenders to lend to people with poorer credit due to securitization.
The only way to recapture a loss on a default is when the defaulter has positive equity in the resale value of the car in a given moment. When that is the case, default is not usually imminent, because the car can then be sold by the owner for an amount that will actually satisfy the balance of the loan. If a third of the initial new value is depreciated in the first year (much less than the amount of the payments made in that year), and there's a default during that time, someone other than the person in default is taking a loss. It's not until the loan matures that there is any kind of positive equity to recover.Yes, there are costs, but they are largely fixed when we talk about repossessions. Therefore, if a used car that might be worth $6000 repo'd in 2006 is worth $9,000 today...
Which market share? The share in nominal sales, or the real share in terms of actual performance? You're not talking about "share" as a demographic split between auto competitors. You're talking about "share" in terms of who they can get to sign on the dotted line. By your logic, if they start offering car loans to the homeless and unemployed, that would have to count as an increased "share" of the market.Obviously lenders who want to increase their market share are lowering their FICO minimums.
FICO maximums? That was never brought up (until now) because that would be stupid and irrelevant on its face. Is anyone being turned down for loans because their credit rating is too good? "I'm sorry, sir, we would like to give you a loan, but you have exceeded our FICO maximum."You seem to imply that you're surprised FICO minimums are going down but FICO maximums aren't going up?
Or are you equivocating with a claim of some kind of relevancy effect for FICO scores, implying that quality of credit risk is actually improving, to the point where 520 is the new "Pretty Damned Good Risk!" score? Is that what's happening? The market isn't "dumbing down", or reaching deeper and lower into more risk, so much as the floor is coming up, and the Credit Retarded is the new smart?
Yes, of course they are! Just like lenders did with home loans. It's all about expectations--and a bandwagon effect, as once you finish skimming the cream, you go further down into the barrel, even to areas not exploited before. It's like a swarm of locusts. They consume the crop, then keep consuming, until they chew down to the very last nubs of anything that even looks like it might have nutritional value.WTF is a lender going to do - say, "oh, hey we'll take 800+ people now since we didn't before?" I mean seriously?
You have it ass-backwards. I'm saying that there is no change in the makeup of car buyers--in the spectrum of would-be car buyers. The only real change is WHERE in that spectrum the net is being cast. You're implying that the lower spectrum has somehow increase in credit quality, without saying how, to wit:Again, you haven't demonstrated that the makeup of the car buyer is changing. Rather, you've said simply that banks are willing to make loans to people they wouldn't before. Cool; that says nothing about the actual change in car buyers.
Go preach that message to the subprime lenders, who actually use it as a metric.Subprime, as measured by credit score, is a really piss poor way to measure the subprime market...
Oh, is that what you would venture to guess? Now who is waxing worse-than-anecdotal, with broad generalized assertions with no reason, logic or evidence in support.I would venture to guess that subprime borrowers today are vastly better financed as far as debt-to-income ratios than subprime borowers in 2002-2006.
Ah yeah, that's probably what happened. Well, you're clearly arguing that the floor has come up. People have shed their old debts, and have incomes and spending that show that they're flush for readiness for new debt, which means that the true credit worthiness floor has actually risen. That's debatable, of course, but moot in terms of how it all plays out, which we have yet to see.Your credit score doesn't mean anything insofar as your ability to repay, hence why credit scores are relatively unimportant in mortgage lending - what you earn and what you spend are far more important. If you have a bad credit score today, it's probably because of a job loss and late payments in 2008. If you had a bad credit score in 2002-2007, you were just a deadbeat. Given that debt servicing costs continue to fall, Americans have much more cash flow today than a few years ago, regardless of their credit history from the bust years.
You lost me at "I could pick and choose a datapoint..." -- not sure, but I think that a single point of data qualifies as anecdotal.I'd be interested to have long-term data on that Fitch index. There are several as it relates to cars. I could pick and choose a datapoint from September 2012:
The subprime sector also exhibited stable performance this past month. 60+ days delinquencies rose to 3.24% from 3.17%, only a 2% increase MOM. The stability in this sector has been driven largely by 2010-2012 subprime deals, which have been subject to stronger underwriting standards than weaker 2007-2009 vintages that have mostly paid down.
Yeah, and regardless of the subprime fundamentals, whatever they are and however they are interpreted, how about this non-sequitur from another October release, where Fitch is claiming that the "Fiscal Cliff" could put the brakes on everything.
Sounds fragile, not "antifragile" to me.Fitch: Fiscal Cliff Could Brake U.S. Auto Sales Growth [SOURCE]
Should the combination of tax hikes and spending cuts come into force at year end, we believe it could lead to an unraveling of some of the factors that have clearly helped buoy the industry over the past couple of years.
To be sure, U.S. auto sales in September showed a nearly 13% year-over-year improvement, and sales figures have been growing steadily for several years. Regarding the fiscal cliff, in our opinion, it is likely that all or some of the tax increases and spending cuts will be resolved or at least temporarily deferred. With that said, the possibility of a nonresolution to the U.S. fiscal cliff could precipitate some detrimental knock-on effects for the auto industry that could potentially put the brakes on continued growth.
In our most recent "Global Economic Outlook," we projected that an unresolved fiscal cliff would push the U.S. economy into another recession and lead to a 3% cumulative loss of output by 2014.
News from earlier today:
http://www.washingtonpost.com/busine...02c_story.html
More at link.US auto sales stay brisk in November, spurred by economy and Sandy, but fiscal cliff looms
DETROIT — Superstorm Sandy gave an extra boost to U.S. auto sales, making November the best month for carmakers in nearly five years.
Toyota, Volkswagen and Chrysler were among the companies posting impressive increases for November, which is normally a lackluster month because of colder weather and holiday distractions. Only General Motors was left struggling to explain yet another month of weak growth.
Industry sales rose 15 percent from a year earlier to 1.1 million, according to AutoData. That was their fastest pace since January 2008. U.S. sales would reach 15.5 million this year if they stayed at November’s rate, far higher than the 14.3 million rate in the first 10 months of this year.
Americans are more confident in the economy, a key driver of auto sales. Home values are rising, hiring is up and auto financing remains readily available. And besides just feeling better, people need to replace aging cars or vehicles damaged by Sandy.
Freedom is a state of mind. Nobody can take that from you unless you let them.
FWIW, Jordan has made the most thoughtful, logical, and statistically supported argument in this thread.
Yeah, too bad he won't answer my question, which makes all the difference. It's interesting to me because even zippy's article posted above doesn't actually state whether these sales figures are based on dealer-to-public sales or manufacturer-to-dealer sales. Contractually, dealers are required to take (and "buy") pretty much whatever the factory sends them. Then the manufacturers can claim record sales even while those same cars are still sitting on the dealership lot unsold.
"Let it not be said that we did nothing." - Ron Paul
"Always give your best, never get discouraged, never be petty; always remember, others may hate you, but those who hate you don't win unless you hate them, and then you destroy yourself. " - Nixon
Why most RPF members are against the US involvement with Israel explained by Mini-Me:
http://www.ronpaulforums.com/showthread.php?t=218093
No anti-semitism, just logic.
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