Originally Posted by
Melonie
^^^ well they certainly face direct risk of loss i.e. borrowers declaring bankruptcy and stiffing them for the outstanding balance. In fact, they face a significantly higher risk of this happening than most auto lenders. But thanks to the 'structured interest', as long as the borrower doesn't default immediately and makes a few 100% interest only payments before the repo and auction, their losses will actually be relatively small after the auction price of the car is netted out.
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