Las Vegas auto industry veteran, Lucky Lopez, talking about the huge wave of repossesed cars piling up at car auctions, and heading to dealers soon. He shows an auction lot with thousands of vehicles, in the video. If you are looking for a good, late model used car, there should be some great deals coming along for several months.
I've been blogging about jobs since at least June of 2017, when I couldn't find any job in North Carolina. This is one of those posts from September 2017. I've been blogging about the "coming major recession" (possibly a depression) since early 2018. It's here now, we're heading into it. I started selling my Sharpie drawingsin late 2015, not because I dreamed of being a famous artist, but because it was the only way I could find to make any money while stuck in North Carolina for years. The Sharpie art has helped me scrape by for 6 1/2 years now, and squeak through the pandemic. My blogging is about the things that interest me most. I think we are in a crazy period, I call The Big Freakin' Transition, in between the Industrial Age and the Information Age. That's a lot of change by itself, and now we're going into another recession, adding more change to the mix.
But now, it looks like the gnarliest part of this economic downturn is really beginning. Prices have dropped a lot on stocks, crypto, some collectibles, and real estate is beginning to head south. Seeing this turning point really get going, I just spent three weeks writing a report on why this coming recession will be a great time to find epic bargains on major items... if you have some cash to spend.
Doing research for that report, I wanted to see which items were already falling in price, and which were still holding up. In that research I found this video by Business/Hustle YouTuber Graham Stefan, "The Car Market Bubble Just Popped." Obviously, the title caught my attention.
Did you know that Americans have $1.5 trillion in total auto loan debt? Even crazier, the auto loan industry now has a subprime loan problem, pretty much identical to the subprime mortgage crisis that sparked the 2008 Great Recession meltdown. Since 2009, auto loans have been sold, repackaged as investment securities, and sold to banks, pension funds, and other institutional investors. To keep those loans rolling in, some lenders didn't do all the due diligence in verifying people's income during the pandemic. In short, a whole lot of people bought cars and trucks in recent years that they couldn't really afford. Remember MBS (Mortgage Backed Securities) from the 2008 crisis? Yeah, auto loans and leases have been packaged as ABS (Asset Backed Securities). That same thing has also happened to student loans, packaged as SLABS (Student Loan Asset Backed Securities), and business debt, packaged as CLO's (Collateralized Debt Obligations).
These securities are viable, as long as nearly everyone is paying their loans. But guess what, a bunch of people bought cars and trucks they couldn't afford, especially when living large on stimulus money in 2020 and 2021. Enter Las Vegas auto industry veteran Lucky Lopez. That's him in the top video. He calls those people who bought cars they couldn't affordby using stimulus/PUA/PPP money "Stimulus Ballers." They bought a pimpin' ride, dropped pandemic money on a big down payment and then... never made their monthly payments.
That causes two problems. Number one is that thebanks or auto lenders have to spend time and money having people reposess all those vehicles. Then they have to try to sell them to get as much of their money back as possible. Number two is that when lots of people don't pay their loans, then the investments made from bunches of loans (ABS) lose value, or become worthless. More on that in a minute.
Because of the Stimulus Ballers, and others who just got behind on payments, there's a record number of car and truck repos happening right now. How many? According to Lucky Lopez in the video above, there were 2.2 million vehicle repos from January to late June 2022. To put that in perspective, there were about 1.7 million, all year, back in 2018 or 2019. So there are a ton of cars and trucks getting repoed now, that are just beginning to show up in car auctions, and in used car dealer lots. Since used car prices SOARED in the last couple of years, that's good. Used car prices should start dropping.
The bad part, also according to Lucky Lopez' info, is that a lot of those car loans were 110%, even up to 130% loan to value. That means someone may have gotten a $130,000 loan for a $100,000 car. So a lot of the banks have bad loans, with vehicles that are worth quite a bit less than what the loan amount is. So banks and auto loan lenders will be taking losses. Also, banks and big investors who bought the ABS securities will be taking losses, at some point, when those securities lose value, because so many people aren't paying their auto loans now. This could lead to a banking system crisis, much like 2008, at some point. There were $1.3 trillion in subprime mortgages in 2008, and there is now $1.5 trillion in auto loan debt. There's also $1.7 trillion in student loan debt, and $1.1 trillion in credit card debt, in the U.S.. Want to see how much total debt there is in this country, take a look at the U.S. Debt Clock sometime. But not for very long, it's depressing.
What this means for you is that there's a tsunami sized wave of car and truck repos happening, and there should be some much better deals on used cars coming in the next several months. If you are thinking about buying a car in the next year, check out all these videos to learn more.
Lucky Lopez: Used Car Market Bubble Popped!!!- January 2022
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