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" ...auto equity cash-out financing in used cars." I've never seen this before, he said. And it's a worrisome sign. (Do I understand this correctly? People trade-in cars just for cash?) I found it on the Bloomberg website. Can't find it again.
A few banks, including Wells Fargo, will let you borrow more than your car is worth, putting you in a negative equity position from day one.
Bob Hurzeler, head of Wells Fargo's direct-to-consumer auto finance division, says the bank will lend up to 152 percent of the car's wholesale value, although very few customers will qualify for the maximum.
"We look at your payment-to-income (ratio), debt-to-income, your car, your credit history, but mostly the ability to pay," he says.
On its website, Wells suggests using cash from a vehicle refinancing for uses such as "holiday expenses" and "summer landscaping."
Gawd. They just have NO SHAME. But, should anyone be surprised? We are living through a new gilded age. Most people are left to suck for basic air, while fat cats are busy luxuriating. Sitting in gold-plated armchairs.
Re: " ...auto equity cash-out financing in used cars."
For years folks in need of short term cash at below the prevailing rate for unsecured debt have been using their motor vehicles for collatoral - if that's what they mean. If you have a 3 or 4 year model that's fully paid off it's quite easy to do. I recall doing it once myself maybe 30-40 years ago to cover a short term need. And likely you could do the same with a fully paid-for boat, Harley or RV.
Have noticed some credit unions recently advertising "secured loans" at 2-3%. I'd imagine that's for a very late model auto. Compare that to their 14-16% rate for unsecured loans (or an 18% rate on unpaid credit card balances) and you can see why it's attractive to people.
I won't dispute Chanos' point that an increase in this type of borrowing is a worrisome sign. Hell, there's enough worrisome signs out there right now to give me an ulcer.
Wait a sec. For 6 months we have items in the news suggesting Subprime auto loan size is rivaling subprime mortgage size at the time of financial crisis. Everyone pretty much knows how cheap it is to lease a car these days. Chanos says something *now* and suddenly it is newsworthy?
@VintageFreak: yes, take a step back, and I see your point. At SOME point, it all gets too very complicated for me. When I first saw 5 and 6 year car-loans, I told myself: "Self, this is nuts. Crazy. obscene. Beyond the beyond. And someone wants to LEND me 48% MORE than the paid-off car is worth??? (Like Wells Fargo?) That's exploitation, in your face, and un-disguised.
Comments
Regards,
Ted
https://www.periscope.tv/w/1OwxWAMANoRGQ#
Car-loan-refinance-can-save-money-beware-cash-out
For years folks in need of short term cash at below the prevailing rate for unsecured debt have been using their motor vehicles for collatoral - if that's what they mean. If you have a 3 or 4 year model that's fully paid off it's quite easy to do. I recall doing it once myself maybe 30-40 years ago to cover a short term need. And likely you could do the same with a fully paid-for boat, Harley or RV.
Have noticed some credit unions recently advertising "secured loans" at 2-3%. I'd imagine that's for a very late model auto. Compare that to their 14-16% rate for unsecured loans (or an 18% rate on unpaid credit card balances) and you can see why it's attractive to people.
I won't dispute Chanos' point that an increase in this type of borrowing is a worrisome sign. Hell, there's enough worrisome signs out there right now to give me an ulcer.