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Thread: Repos

  1. #1
    God/dess Deogol's Avatar
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    Default Repos

    Across the country, the number of vehicles repossessed grew 10% to 1.51 million in 2007, and it is expected to grow by another 10% this year, said Tom Webb, chief economist with Atlanta-based Manheim Consulting, which auctions off most of the repossessed vehicles in the United States.

    ...

    "I'd say the majority of people are working families, middle to lower middle class," Pipkin said. "But we have our fair share of doctors, lawyers, correctional officers, state and county employees -- upper economic class people.

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    Last edited by Deogol; 07-27-2008 at 08:39 PM.

  2. #2
    God/dess Deogol's Avatar
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    Default Re: Repos

    A bit more:



    Chrysler Halts Auto Leases
    Move Could Dent Sales;
    Vehicle-Financing System in Turmoil
    By NEAL E. BOUDETTE and JOHN D. STOLL
    July 26, 2008; Page A1

    DETROIT — In a sign that the woes afflicting Detroit and Wall Street are starting to feed on one another, Chrysler LLC said Friday it will no longer offer auto leases through its lending arm, a move that could further crimp the car maker’s sales.

    The move by Chrysler Financial, first reported on the Web site of The Wall Street Journal, comes as the finance unit has been scrambling to borrow fresh money amid tight credit markets. It also underscores how weak sales are starting to undermine the financing arrangements that underpin American car sales.

  3. #3
    Banned Melonie's Avatar
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    Default Re: Repos

    ^^^ well, besides the shortage of capital with which to finance new leases, there is now a potentially huge risk involved with writing car and especially truck leases.

    Think about this for a minute ... the #1 factor in writing a lease is correctly costing the difference in new vehicle sale versus lease return resale value. Leases written on trucks and SUV's 2-3 years back made assumptions in regard to 'Blue Book' resale values that were expected to apply today when the vehicle is returned with X miles on it. However, the skyrocketing price of gasoline over the past 2-3 years has had a MAJOR impact on the used vehicle market - with far fewer buyers for 2-3 year old trucks and SUV's that get 10-15 miles per gallon !!!

    As such, Chrysler and all other leasing companies costed the leases written 3 years ago on the basis of a $30k SUV having a resale value of say $18-20k when returned at the end of 3 years with 30,000 miles on it. Unfortunately, in today's used vehicle market with tons of SUV's for sale and few willing buyers, the ACTUAL price they are able to recover at a dealer auction may now only be $13-15k. This $3-5k difference represents pure financial 'loss' for the leasing company.

    Additionally, in regard to writing new leases, besides the higher cost of capital there is now a huge risk of the 'unknown' in regard to future depreciation cost. And if the leasing companies were to attempt to increase the pricing of a new lease to the point where they are sure they will break even, the monthly payment will wind up being the same as that of a 5 year 'purchase' loan ... essentially making the lease unsellable !

    Finally, to make matters worse, the 'lease buyout' price attached to 2-3 year old leases was also based on 'Blue Book' resale value expectations that are unrealistic in today's used vehicle market. Thus any leaseholder with 1/2 a brain is now 'turning in' their leased vehicle rather than making the 'lease buyout' payment and keeping it ... because they can simply walk down the street to any used car dealer and buy a different vehicle of exactly the same make and model, and with exactly the same mileage as the vehicle they are returning, at a price that is #3-5k lower than the 'lease buyout' price ! The much higher number of lease returns only adds to the available supply of second-hand vehicles, and further depresses the market price, which then snowballs into bigger losses for the leasing companies !

    Essentially, the vehicle leasing industry today is in exactly the same financial situation as the 'subprime' mortgage industry was two years ago. However, we have yet to see the eventual financial tsunami from second-hand vehicle finance anywhere but the back pages of the news media and the used car lots.

    And all of the above is further aggravated by both leaseholders and 'subprime' auto loan buyers going belly-up on the terms of their leases and loans ... leading to record high repos ... thus further increasing the available supply of second-hand vehicles, further depressing second-hand vehicle market prices, and further increasing losses for both the lease companies and the auto loan companies ! Undoubtedly we'll see a wave of lease company / auto loan company bankruptcies in the very near future along the same lines as the 'subprime' mortgage loan companies.
    Last edited by Melonie; 07-28-2008 at 12:13 AM.

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