Oddbean new post about login | logout @Sick Burn, Bro Because the collateral is constantly depreciating and auto loans are like 7 years long now
it's always been depreciating though and 7 year loan should be an opportunity to frontload even more interest payment
@6e030f75 @Sick Burn, Bro Better explanation is they don't think they can pay them back.
cars are a self-collateralizing loan though, if someone doesn't pay, you can repo it
And used car prices are sicko nutso, it seems hard to miss.
@Sick Burn, Bro @6e030f75 It goes down in value though, and one has to do something with all those cars once they get them. Presumably sell them.
yup! that is also likely part of it - fear that they won't be able to sell off vehicles that they've repossessed - which is kind of crazy with the prices on used vehicles today
@Sick Burn, Bro @6e030f75 My best guess is they anticipate a depression. My second is things aren't going well in the bank and they're moving to safer, maybe more dependable loans.
that's assuming there is a better place to put all that money though. It's not like CRE is safe
@Sick Burn, Bro @6e030f75 High prices -> leaving the market is like 2+2=5. Unless they think people will simply not be in the market at reasonable prices in the near future. I'm curious, what's your best guess?
my best guess is that they don't see the price structure as maintainable, which will mean first deep price cuts which will then destroy the value underneath their loans - even those existing, which will increase the zone for people to just walk away, but will then also dry up the market ( as people wait ). Better to call it quits then you can focus on wherever else. They may not even have someone saying "this is gonna be a depression" - it might just be a series of economic indicators which they have a model run, and it says "yeah you're gonna lose 2% over the next 24 moths for every dollar you put in"