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Auto loans dangers and alert

financing shenanigans and ABS sale

This is the Pit Stop. Instead of a cold shower, 30 minutes of yoga, 2 cups of coffee, and a slap from your mechanic, we wake you up with 3 minutes of automotive news. Safer and less painful than getting your ride souped up with a nos kit.

So, buckle up, and let’s hit the road together!

The Red Light: Juicy intel on automotive financing

Digging Deeper:

Buckle up for the bumpy ride because, with the help of our friend The Car dealership GuY, we’re diving into some wild financing shenanigans. As he dug through he found some juicy intel on what was really going on. It looks like some lenders are playing games with the DTI (debt-to-income ratio) to approve customers with higher DTIs while pretending to be tightening in other areas.

Stop! and get this, underwriters are even more lenient towards waving existing auto loan stipulations, especially after a phone call with the store. Talk about making it rain! But here’s the catch, if the customer defaults on the pre-existing loan, the bank issuing the new loan won’t be affected.

Now, before you start revving your engines, know that this is a risky move for everyone involved. Rolling existing auto loan balances into new ones can lead to a world of hurt for consumers, including repossessions, bankruptcies, and a bad rep for lenders and dealerships. Let’s just say, it’s like trying to drift around a sharp turn without hitting the wall – sure, it might look cool, but you’re risking a major wipeout. So, let’s play it safe and stick to the straight and narrow.

Santander delaying selling $942 million worth of bonds:

Red light here! Have you heard about Santander delaying the sale of $942 million worth of bonds backed by subprime auto loans?

That’s a major issue, my dude. If banks can’t get that cash flow, they’re gonna tighten their lending like a pair of skinny jeans on a sumo wrestler. We’ve seen this happen before with those mortgage-backed securities in ’08. Santander and other banks are playing it safe by tightening their subprime lending, which could mean fewer options for all of us in the future. Some of these subprime lenders haven’t been keeping it real, and that’s putting bondholders at risk. This delay is a big red flag, my man. Other subprime vendors could face similar situations, and then what? No more subprime lending? That’s like no more NOS in a street drift race.

so to sum it up with a TLDR:

  • Lenders are playing games with the DTI to approve customers with higher DTIs while pretending to be tightening in other areas.
  • Underwriters are lenient towards waving existing auto loan stipulations, especially after a phone call with the store.
  • Rolling existing auto loan balances into new ones can lead to a world of hurt for consumers, including repossessions, bankruptcies, and a bad rep for lenders and dealerships.
  • Santander delaying the sale of $942 million worth of bonds backed by subprime auto loans is a major issue.
  • If banks can’t get that cash flow, they’re gonna tighten their lending like a pair of skinny jeans on a sumo wrestler.
  • Some subprime lenders haven’t been keeping it real, and that’s putting bondholders at risk.
  • Other subprime vendors could face similar situations, and then what? No more subprime lending? That’s like no more NOS in a street drift race.

Thanks to our friend The Car dealership GuY for keeping his eyes open for us so we can prevent an automotive industry SVB situation.

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CONTACT US

ahmadibrahim@windowslive.com