Auto Loan Crisis

What's going on YouTube family today, we're gonna be talking about the auto loan crisis and giving you guys an update now It's finally hitting the mainstream news people are talking about it And I'm starting to get asked for interviews again on a lot of popular news stations So stay tuned for that one But I want to go over how we got here and some of the things that are happening So there are a lot of naysayers saying that the auto loan crisis is not real. It's not happening It's never gonna happen blah blah blah So I'd like to turn the clock back to 2008 and talk about the housing crisis Now back then they were doing a lot of what's called ninja loans, which is no income verification no job verification You just walk in there as long as you're breathing and you have a pulse They would give you a home loan and so many people were out there buying homes I remember literally sitting at a PT's talking to a Walmart door greeter that had three homes here in Las Vegas and Everybody thought that the market could only go up and there's nothing wrong and nobody was talking about it. Just like today There's nothing in the news Now the big thing is is as the market started basically crumbling and people started losing their homes Nobody really talked about it except for the bankers I remember my friend telling me explicitly sell your home get out of it There's a bad thing coming and so he walked around looking like the boogeyman. Nobody believed them said Oh cop being negative houses only go up. They never go down It's never gonna happen in a million years and I remember watching CNN Fox News Pretty much all these news stations reiterating the exact same thing. The economy is fine There's nothing wrong with the housing market houses only go up and then literally overnight everything crumbled Now the big thing with this is the way they rated their paper If you've seen the movie the big short, you'll know exactly what I'm saying Watch that movie and you'll totally understand what I'm talking about Now there's people out there that were grading basically really bad mortgages subprime mortgages is triple-a paper or they would bundle them together And basically sell them off to the stock market people's investment firms your 401k your hedge funds Pretty much old people's retirement programs and so now all these people are holding these really bad loans that are not performing that are worth pretty much half of what they're Gonna be in the next four to five years This was the straw that broke the camel's back when it came to the housing crisis and everything kind of collapsed fast forward to 2021 in 2022 and that's exactly what happened for some reason during the pandemic since a lot of people are out of work banks decided to Take it on themselves to not do job verifications You can check with experience 92% of auto loans issued from 2020 to 2022 did not have income verification or job Verification which is two totally different things income. We check your bank statements and everything else We can get your pay stubs, but it doesn't really count also income They call your job and do all this stuff So they didn't do two of the most major important things to verify that you're an actually employed person Making good money on top of that. We always looked at history so if you let's say made $2,000 during the pandemic, but then all of a sudden with all your stimulus money and your bonuses you're making four grand We still wouldn't sell you a car that you could qualify for for 4,000 We would take your previous income and maybe bump it up a few dollars We wouldn't go crazy, but during the pandemic banks basically lost their minds. They said you know what we're gonna go Maybe 160 170 percent of LTV on subprime borrowers But then as these cars started selling out what happened dealers couldn't get a hold of certain cars and cars started going up in value so that 2005 Toyota Corolla that was worth maybe five grand is now worth ten grand So now dealers are saying I need ten thousand dollars to sell this car or I'm not gonna let it go. It's gold So some banks said okay. Well, we'll go up a little bit higher We'll go 200% of LTV, but then as these cars started selling guess what happened the value of the car started rising So now if they did 200% on a $10,000 Toyota Corolla I'm sure we'll do 200% on a $20,000 Corolla and give somebody 40 grand for maybe a 2012 Corolla and that's exactly what happened and slowly, but surely the market got out of control We saw prices increase faster than we've ever seen before in automotive history. I saw people literally Overpaying for economy cars. I've never seen that before even when there's something cool new trendy economy car I don't know if you guys remember but back in the day Kia Souls when they first came out a lot of people wanted Them and they lost their minds The last time I saw that was with the PT Cruiser when the PT Cruiser came out there was idiots Still paying ten twenty thousand dollars over MSRP for the woody additions. Believe it or not Now you can you can't even I don't even see those cars. I haven't seen a PT Cruiser and probably two years I don't think they're even alive anymore because they're just junk but that's what we saw in the market We saw people fighting over Kia's Hyundai's and Honda's paying ten fifteen twenty thousand dollars over MSRP Now the reason why I'm talking about the update today is because now it's finally hit the mainstream media and they started to talk about It but still when I go to these events and other things nobody's talking about dealers are not worried. They don't care And I'm like, what are you gonna do when your bank stops lending? Oh, they're not gonna stop lending the banks always land I'm like no when they have a certain amount of defaults or a certain amount of deficiencies. They're gonna stop They're gonna pull the purse strings and they're gonna stop lending. Oh, it's never gonna happen It's never gonna happen and it started to scare me. I started having flashbacks of 2008 I remember my friends that were doing mortgages We're literally doing mortgages up to the day that basically on every news channel. They were saying that there was something wrong They're not even joking with you guys. Everything is fine. Everything is fine, you know, and right now everybody's listening to the mainstream media Oh, and yet it's not that bad And as we talk about this stuff the hardest thing for me to do is to convey how serious this is So a lot of banks hide behind the Fair Credit Act They can't share any information because it's personal information and it's not allowed But using this as a crutch to hide the true numbers of currently what's going on is mind-boggling just like my friend when he told me that he had people that was Investing in mortgages saw how they were defaulting and how people are walking away from their homes before the fallout We're seeing it today every time I go right out of loan portfolio Now if you watch the big short you can see people literally they had a clip where they went to Moody's and Moody's was supposed to give every mortgage a triple-a rating even though it wasn't so as they started asking Why would you give this triple-a if tranches of this mortgage? Bundle is C paper or D paper or F paper and they said that's just what they were told to do To just slap a on it and sell it and so we're exactly here right now with the auto industry Every time I go look at an on loan portfolio Whether it's a buy here pay here dealer another bank trying to liquidate some of their paper My job is to look at the paper Sum everything up and give it a rating and I've never seen so much paper out there It was horribly written Like we have certain guidelines Every bank does everybody has this like general idea if it's an older car You don't go past a certain amount of months if it has a certain amount of miles you charge More interest if they have bad credit, there's always some sort of structure to this but when I saw people giving 72 month loans on a 2005 Ford f-150 with 200,000 miles because they had to sell it for like $18,900 it blew my mind people were going nuts during the pandemic. And so now I'm sitting here telling multiple people banks dealerships Your portfolio is not what it's worth all these banks know that they're holding on to a hand grenade and it could explode at any minute There are tons of people literally walking away from their cars saying why am I gonna pay? $60-70,000 for my used Dodge Charger when I can go buy a brand new one now for less than that And so what do they do they go out and buy the Charger and once they get financed They just let the other car go So as we walk through some of these bank lanes repo lanes and stuff like this This is what we're seeing and it's very hard Like I said to get people to believe in some of this stuff So I will take you guys to some of the auctions. I respect the auctions I can't really show a whole lot that's in there There are some youtubers that will do that You could see on their channels But as far as like banking goes as I start looking at this auto portfolio every single month That's getting worse people that think their portfolio is worth. Let's say 20 million dollars It's really truly valued around five and a half million That's how big of swings we're seeing and that type of difference is never normal Especially on subprime paper because a lot of banks like to get subprime paper because of the interest 15 20 30 percent depending on what state they're in and so a lot of banks always want to buy that paper now All my banks that I deal with will not touch any of the subprime paper and especially in different states The only places I've been seeing out of loan portfolios still sell pretty quickly is in Texas Because for some reason Texas is like a different economy people pay their bills they're making money, but everywhere else it's horrible The Midwest is a little bit better But it's usually the coastal cities have the worst either buy here pay here portfolio or the auto loan portfolio Now it's kind of crazy because there are more 800 credit scores up and down the coast and that's another thing that I wanted to Talk about was everybody knows that the subprime markets gonna default and and we all expect that But also what they were talking about in the big short was the fact that there were so many prime borrowers Defaulting as well. And that's exactly what's happening now now in 2019 The average default rate was 2.2 percent for prime borrowers After they stopped reporting it back in I think it was 2023 It got all the way up to five point nine percent Which is almost triple as of today as looking at some of these bank portfolios and just doing my own numbers we're hovering somewhere around six to seven and a half percent for prime borrowers, which is almost five times the normal rate of Deficiencies and delinquencies so that is a very scary number if banks are worrying about their prime portfolio Going bad and remember when it's prime believe it or not banks don't like a lot of prime They make a little bit of money because they charge low interest the big money is made on the subprime market That's kind of what balances out the books that and credit cards but if they're secure loans, which they always think is a good thing is a sure bet a steady money is Defaulting this is what's scaring the banks and this is what's scaring me as well As a lot of the people that we saw walking away from their cars all tier one buyers A lot of these people weren't even late. They just saw how much their car was worth I just saw it was a Toyota Camry TRD the guy owed $30,000 more than what it sold for at auction Perfectly clean car I think it had like eight thousand miles But he went to the dealership saw the exact same car for probably half the price went out bought it and then just let this one go and so every week is I'm talking to banks as we're going to the auction we're seeing this happen more and more and the scary thing is is If you go to any auction You literally you can see there's thousands not hundreds Thousands of cars going every single week and then if you look in the storage lots There's even more because banks know that they have to slowly trickle out these repos Because if they flood the market the values drop even further on top of that every week a lot of these cars are not selling They're called no sales. What happens when I bid on a car and it's worth 38,000 I bid 38 and the bank once 48 It's called a no sale and it goes back in the line But every week these lines are getting longer at the auction I used to be in and out of the auction during the pandemic 35 45 minutes today Maybe two to three hours, you know, and sometimes I remember being at Odessa. I think it was almost five hours I was there all day watching cars go by and unfortunately, there's a lot of no sales I'd say somewhere around 45 close to 50% it got to 50 for a while, but banks started letting stuff go But I think now that the market continues to slow down and people can't afford these cars and banks are starting to lend It's gonna be a really hard thing because eventually people just have to let go and right now it's a battle They're still thinking the economy is okay Everybody's believe in the news and I don't know if it's the government propping up the economy because everything I'm seeing now is bad People are literally losing their houses losing their cars They can't make ends meet their insurance is tripled gas is tripled. You know, the affordability of Buying regular things is ridiculous Unfortunately, I know much of a grocery shopper, but my friends tell me groceries have literally tripled eggs and milk So if you're on a fixed budget and you know, every dollar counts Just imagine if your rent doubled your insurance doubled and everything else. How can you afford your car? Do you feed your kids or do you pay your car payment? Do you pay your insurance or do you pay your car so you can get to work? So now if you get into an accident or something happens you lose your car And these are the things that are facing everyday Americans Every banker that I talked to literally is going on about how many programs they have to help people that are currently struggling I recently talked to my bank, which is Navy Federal Credit Union to ask them, you know what they're seeing and what they're doing Unfortunately, they couldn't tell me what they're doing for other people But I thought I would just ask about my credit card my car payments to see what they can do and there was forbearance programs They were working with people to lower interests to pause credit cards to do all kinds of stuff So letting me know the banks are willing to put pauses and keep people in their cars instead of repoing them right away Means that they're very scared. They don't want to take on all these cars that people can give back They'd rather pause the payments for a few weeks or months. Let people catch up and then restart them So the auto loan crisis is getting more real It's touching mainstream America. And like I said, you're gonna see me on a lot of news channels here very shortly I've already got it invited to about four interviews and we're gonna start going over a lot of this stuff Anyways, I'd like to thank you guys so much for watching. Please. Let me know what you think of the auto loan crisis Did you know is this bad? Also, have you heard anything? Is it really quiet in your area? Are you a dealer? Do you hear your bankers talk about it? Do you hear other people talking about it? Are your friends and family losing their cars, please put in the comment section below The whole point of this channel is to be transparent about the automotive industry and everything you share means a lot and guess what? Even if your opinion is different from mine, that's okay. We could still be friends and that's it So I want to thank you guys. Once again, we'll see you next time Make sure you like and subscribe if you learned anything follow me on instagram at lucky Lopez and we'll see you next time