GM Warns of Impending Auto Bubble

[AZRedhawk44]

http://freebeacon.com/general-motors-executive-warns-of-impending-auto-bubble/

If you're in the market for a new vehicle, save your pennies and try to sweat it out for another year or two.  Sounds like those $40,000 price tags are gonna start getting sliced at.

GMF has the riskiest lending portfolio of any major car company: 96 percent of its customers have credit scores below 660.  GM’s lending habits parallel those in the housing market leading up to the 2008 crash…GM finished the year with 8.5 percent of loans in delinquency, the highest rate since 2010 and larger than the delinquency rates at Ford, Toyota, and Honda combined.

Granted, the article is about GM Canada auto sales.  However, these subprime auto loans also happen in the US, and the loans are being repackaged just like the home mortgage fiasco from 4-5 years ago.  And sold on Wall Street.

Can you spell Bail Out?  How about TARP2?

Not that I'd ever buy a Government Motors vehicle.  GM is dead to me, along with Dodge (says the 2005 Ram owner).  Next up is probably a Toyota FJ. 

But if GM is doing it, that means to a lesser extent the others are doing it as well (subprime lending for autos).  They're gonna need money. 

[Boomhauer]

I'm patiently waiting...hopefully it will coincide with another "gas crises" so that the prices are dirt cheap due to the auto bubble collapse and the fuel prices. I need a 3/4 or 1 ton pickup truck soon...

[Ben]

I'm patiently waiting...hopefully it will coincide with another "gas crises" so that the prices are dirt cheap due to the auto bubble collapse and the fuel prices. I need a 3/4 or 1 ton pickup truck soon...

If there's not a burst auto bubble, I won't be buying another diesel F250. The dang things are $50K now!

[Boomhauer]

If there's not a burst auto bubble, I won't be buying another diesel F250. The dang things are $50K now!

Yep. Pickup truck prices, especially diesel pickup prices are insane.

I mean a bare bones fleet F250 is listed as what, 28-30k on the Ford commercial website? And that's with the gas motor and regular cab. Diesel adds another 8k or so to that. Then if you want an extended or crew cab...or 4x4...

And then even used diesel engines command such a ridiculous premium...

[brimic]

Hopefully it starts soon, my oldest vehicle might last another 2 years if I'm lucky.

[HankB]

. . . Next up is probably a Toyota FJ . . .

Just read recently that Toyota was discontinuing that model . . .

[AZRedhawk44]

Just read recently that Toyota was discontinuing that model . . .

arglebarglefarglegargle

[TechMan]

The FJ just looks odd to me, not as bad Pontiac Aztek.

[41magsnub]

Just read recently that Toyota was discontinuing that model . . .

I believe that is not true.  There was a rumor about it, but Toyota said they were keeping the FJ cruiser around. 

[Tallpine]

I wish Toyota still made the original Land Cruiser with the cloned Chevy six.  

We're just gonna keep our old stuff fixed up, and I'm thinking of trading the 2006 car for an older 4wd SUV (Cherokee or S-10 Blazer, etc).

I don't think I would want a new one at any price, although a crew cab Silverado that got 23mpg might be nice.  But just the plates and insurance costs more than buying and maintaining an older outfit.

[SADShooter]

The FJ just looks odd to me, not as bad Pontiac Aztek.

Agreed. The cartoonish styling and candy colors turn me off. Otherwise, I imagine it's a fairly capable vehicle.

[RoadKingLarry]

We're just gonna keep our old stuff fixed up, and I'm thinking of trading the 2006 car for an older 4wd SUV (Cherokee or S-10 Blazer, etc).

The middle years Cherokees are far better vehicles than the S-10 Blazers/S-15 Jimmy.

My '92 Cherokee is a much more solid vehicle than the Slightly older S-15 we had.

[Gewehr98]

Yes and no.

S-10s are body on frame.

Cherokees are unibody.   

(Says the S-10 and Liberty owner)

[Tallpine]

The middle years Cherokees are far better vehicles than the S-10 Blazers/S-15 Jimmy.

My '92 Cherokee is a much more solid vehicle than the Slightly older S-15 we had.

Yeah, but there ain't many XJ Cherokees for sale 

I'd much rather have a straight six than a V-6.  A straight four would be okay too, but I don't think there are many of those around in the four-door version.

I did see a dealer ad for a 2001 Grand Cherokee with the 4.0.

[roo_ster]

The FJ just looks odd to me, not as bad Pontiac Aztek.

Ouch.

[Gewehr98]

Neighbor behind me has a bright yellow Aztek parked in his stand of trees.

Every now and again, he'll fire it up, drive it around the yard, and park it again.

Sounds like it runs just fine.  I think he's just too embarrassed to drive it in public.  

[AJ Dual]

Yeah, and I could see the bubble being even nastier than the sub-prime real estate one.

There's always two sides to these bubbles, 1. The paper-shuffling side, like the mortgage derivatives fiasco, and the actual physical assets like the property themselves, forclosures, and excess glut in a market.

The one thing that might have mitigated the real estate market bubble is that you can't move a plot of land. If there's a ton of repossessed used cars floating around, those are highly mobile, just throw them on a truck and take them anywhere you think you can get something for them. Which in turn depresses new car sales, existing stocks of used cars... ad infinitum.

So there's even more potential for the pain to be spread that much more evenly.

[brimic]

The one thing that might have mitigated the real estate market bubble is that you can't move a plot of land. If there's a ton of repossessed used cars floating around, those are highly mobile, just throw them on a truck and take them anywhere you think you can get something for them. Which in turn depresses new car sales, existing stocks of used cars... ad infinitum.

Yay!
That stupid 'cash for clunkers' program drove the prices up by destroying large numbers of perfectly good used cars along with their parts that could have been re-used.
I wonder if this bubble isn't in part caused by the cash for clunkers program or at least an unintended consequence?

[roo_ster]

Yeah, and I could see the bubble being even nastier than the sub-prime real estate one.

There's always two sides to these bubbles, 1. The paper-shuffling side, like the mortgage derivatives fiasco, and the actual physical assets like the property themselves, forclosures, and excess glut in a market.

The one thing that might have mitigated the real estate market bubble is that you can't move a plot of land. If there's a ton of repossessed used cars floating around, those are highly mobile, just throw them on a truck and take them anywhere you think you can get something for them. Which in turn depresses new car sales, existing stocks of used cars... ad infinitum.

So there's even more potential for the pain to be spread that much more evenly.

Back when I was looking for a diesel Suburban, a dealer told me that lots of 10-12YO cars were sent to Mexico, as at that age, the importation/registration/whatever fee dropped considerably.  Also, that they got more money for htem down south and that diesel pickups & SUVs were the mostly highly sought after.

That comports with the number of cars & trucks in tow I see heading down I-35. 

So, yeah, an auto bubble will burst differently than a real estate bubble.

Don;t get me started about cash for clunkers.

[Gewehr98]

Just trying to find a good used small-block Chevy engine made me grimace when hearing about Cash for Clunkers.   

[Ben]

Don;t get me started about cash for clunkers.

Ditto. Some of the destroyed vehicles brought a tear to my eye. Of course no one ever did a real cost analysis of the pollution created by "recycling" perfectly good vehicles and using resources to build new vehicles vs doing something out in left field, like I don't know, driving the old ones another ten years...

Well, I'm sure someone did the analysis, it just didn't see the light of day in the MSM.

[sumpnz]

If people asked "How much?" instead of "How much per month?" this wouldn't be happening.

[Boomhauer]

If people asked "How much?" instead of "How much per month?" this wouldn't be happening.

One of the things that I just do not get is that people are willing to spend the rest of their lives making huge payments per month, when they work a minimally paying job, just so they can drive a "nice car" and trade it in every few years. They are willing to suffer financial hardship and not have two nickles to rub together just to have a "nice car". It is taboo and unacceptable to drive a car older than 4-5 years, apparently.

My ex GF was one of these people. Making roughly 23k a year and paying for not only rent but a 2011 VW Jetta that had a 17% APR loan on it from the already overpriced Carmax, because she "deserved a nice car" (her words, not mine). She was paying nearly $500 a month for it. And to boot, it was an ex-rental car that had its issues. Yeah well I deserve to drive a new truck, but I cannot afford to drive a new truck so I do not. And the best part is that she had an early 2000s Hyaundai that while beat up was reliable. She claimed it needed $1500 worth of work to it so she went out and got a new car thats gonna cost WAY more than tuning up the Hyundai ever would. (and is it any surprise that she had several high interest payday loans or other loans? This girl was taking out these loans to give money to her crazy sister and her deadbeat previous boyfriends). She ended up giving the Hyundai to her crazy sister who of course destroyed it, because thats what family members who you lend cars to do (I'd lend my truck to a trusted friend quicker than I would my family)

 

[charby]

Just trying to find a good used small-block Chevy engine made me grimace when hearing about Cash for Clunkers.   

Do you just want a short block or the vehicle it is attached too?

[erictank]

Yay!
That stupid 'cash for clunkers' program drove the prices up by destroying large numbers of perfectly good used cars along with their parts that could have been re-used.
I wonder if this bubble isn't in part caused by the cash for clunkers program or at least an unintended consequence?

Of COURSE not, Comrade! That would imply that The Administration's program was not perfect in every possible way! As we all know, such a thing may not even be THOUGHT, let alone mentioned. I will be... generous, and forget your statements.