lizzie
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GM Goes Subprime (Some Companies Just Never Learn) | www.bullfax.comGM Goes Subprime (Some Companies Just Never Learn)
Chad Brand submits: Just when I thought General Motors was on solid footing and heading in the right direction after shedding a large portion of its liabilities in bankruptcy, they seem to have forgotten what has happened over the last several years in the world of credit. One of the big reasons GM’s losses were compounded during the recession was because they funded a lot of subprime loans for their vehicles through GMAC. When those loans went sour, the losses not only negated the razor thin margins they had on the vehicle sales themselves, but resulted in a company that lost money on most of their cars. Hence, SUVs (with their fat profit margins) became a focus for the company, even in the face of rising gas prices, which aided their competitors in stealing market share. Since GM has exited bankruptcy and the economy has stabilized management has stated publicly a desire to once again expand into the subprime auto finance market, but this time GMAC was hesitant (and understandably so). Undoubtedly, the result has been that GM could be selling more vehicles if they were willing to finance customers with bad credit who could not get loans elsewhere. This morning we learn that for $3.5 billion in cash GM is buying AmeriCredit (#HYPERLINK "http://seekingalpha.com/symbol/acf"ACF), one of the larger subprime lenders in the country. They will use this new financing arm to get more cars into the hands of more people, many of whom could not get loans from third party lenders due to bad credit, no job, etc.Complete Story »
Will we never learn?:shock:
I guess since GM is now too big to fail, we can have a car bubble, and the taxpayer can pay for auto loans. :roll:
GM Goes Subprime (Some Companies Just Never Learn) | www.bullfax.com
edit: I don't start many threads, and wasn't sure if this is the forum where this one belongs, so if it's in the wrong place, would one of the mods kindly move it?
I hope you're right. I can see it now: headlines in the NYT and LAT "Wallstreet Bigwigs Behind Automobile Crisis":mrgreen:
Will we never learn?:shock:
I guess since GM is now too big to fail, we can have a car bubble, and the taxpayer can pay for auto loans. :roll:
GM Goes Subprime (Some Companies Just Never Learn) | www.bullfax.com
edit: I don't start many threads, and wasn't sure if this is the forum where this one belongs, so if it's in the wrong place, would one of the mods kindly move it?
It is typical. We saw it over and over again with banks for the last few decades. They make poor choices and the government bails them out. Therefore, there is no real risk to making more poor choices.
I would be willing to bet as well that the $3.5 billion GM came up with to buy AmeriCredit is taxpayer money too.
Will we never learn?:shock:
I guess since GM is now too big to fail, we can have a car bubble, and the taxpayer can pay for auto loans. :roll:
GM Goes Subprime (Some Companies Just Never Learn) | www.bullfax.com
edit: I don't start many threads, and wasn't sure if this is the forum where this one belongs, so if it's in the wrong place, would one of the mods kindly move it?
Another reason why you take out a personal loan from the bank to buy a car instead of a car loan.
Not sure what this has to do with banks, perhaps you could explain.
Also does anyone get tired of saying that there is no real risk with banks. ninety banks have already gone out of business this year.
If you mean the mega banks, Bear Sterns was sold for essentially nothing, Lehman went broke, Merill was sold for a song, Citi stock is still down 90% even after the government has been repaid with interest and are selling off 7.7 billion shares at a profit.
It seems so easy to use the trite lines that the administration has sold to so many that do not know much about business.
As they say, the public gets the government they deserve!
Hopefully if this goes sour, we won't break Obama's claim that there will be no more bailouts again.
I was raised to never buy something you couldn't pay for it with cash right then and there. One cannot succeed in life if everything is built on debt.
Unfortunately very few people have the immediate wherewithall to be able to put down all the cash for eitjher a vehicle or a residence, thus unfortunate though it is, there is a need for credit.
Well, there's another issue at hand here: even people with poor credit or no job need transportation in this country. In urban areas, for the most part they can either just walk to where they need to go or use the city's public transportation.
However, in suburban and rural areas, there's usually no public transportation to rely on. That means they need a car to get around - they have no choice.
So many people who get subprime auto loans don't do so because they want to - they do so because they have to in order to get around.
So those who are against subprime auto lending should either 1) call for the auto industry to manufacture cars cheap enough for those who are poor or have bad credit can afford or 2) call for better public transportation infrastructure to be built in urban and suburban areas to allow the poor to have access to transportation opportunities.
Will we never learn?:shock:
I guess since GM is now too big to fail, we can have a car bubble, and the taxpayer can pay for auto loans. :roll:
This is just HORRIBLE!!!!!!!!!
Subprime loans are evil. I was dumb enough to get into one 4 years ago and it was 3 years of HELL!
Sub prime auto loans are already a major aspect of used car markets. Sub prime does not equal adjustable rate lending and only reflects risk. GM's appetite for risk is growing, I don't see this as an absolute negative.
Sure they are. I can go into town and find at least a couple of we-tote-the-note places, and I've been in the position previously where I had to pay a higher interest rate on loans for cars. Point is- GM is now government-owned in effect, and GM losses will affect everyone.
Sure, I agree. Yet you already have a negative bias towards them, which is somewhat understandable. Do you honestly believe gm can grow revenue without increasing risk?
What risk is there when Government Motors can go to Congress with hat in hand to beg for another handout?
So you are making the case for moral hazard? On what grounds?
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