It’s a good time to be a repo man. . . again.
Lots of business picking up used cars people stopped making payments on.
According to S&P Global Ratings and an article in Bloomberg News, defaults on these subprime loans are at their highest water mark since the subprime collapse of 2008 and the “recovery rate” – what the lender ends up recouping of the original debt principle – is a mere 34.8 percent.
It’s a lot of money flushed.
But how is it that cars – all of them, not just the used ones – bleed value this quickly and this much?
It’s because they’re not really worth that much, to begin with.
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As distinct from what their price was, to begin with.
New car prices are hugely inflated – mostly because of electronic gadgets that dazzle when new and for which people will pay (that is, finance) top dollar . . . but which get old and lose value quickly.
They don’t get old in a calendar year or wear-and-tear sense but in terms of their “latest thing-ness,” which vanishes like a late April snow shower. Think how quickly your smartphone or computer hags out. Now consider the screens and apps and other such they’re installing in cars.
How useful is a five-year-old GPS system with a non-touchscreen and without the latest version of whatever-the-latest-apps are? It probably doesn’t even have the latest app to version up to.
And how much is a five-year-old laptop worth? It cost $1,200 new.
Today, it’s worth $200.
Cars have become similarly short shelf-life items because they are a bundle of computers and apps and screens as much as they are gears and cams and wheels.
Another problem, beyond almost-immediate technological obsolescence of the gadgets, is that in-car electronics and…