> Most of the loans on recently repossessed cars originated during 2020 and 2021, whereas origination dates are normally scattered because people fall on hard times at different times; *loan-to-value ratios, or the amount financed relative to the value of the vehicle, are around 140%, versus a more normal 80%*; and many of the loans were extended to buyers who had temporary pops in income during the pandemic.
That's CRAZY!
This means that lenders were, on average, willing to lend not only the full cost of the vehicle, but also up to 40% of the equity of a previous vehicle! (This sounds like a practice that is more common in subprime land, but still, this suggests that you can basically get a loan with weak proof of being able to pay it back).
This article reminds me of the Air France 447 crash [1].
The long and short of it is that the pilots thought they were level based on the data from the pitot tube sensor, but because it was frozen and a SPOF, they not only got bad data, but they didn't know that the aircraft was actually tilting slowly downwards for hundreds of miles! Eventually, the aircraft stalled unrecoverably and crashed into the ocean.
Auto manufacturers have been increasing prices on new vehicles (and dealers on used vehicles) partly due to supply chain tightening, but also due to a perceived increase in people's willingness-to-pay in response to the tightening and temporary pops in income. However, this article suggests that, like the pitot tube in the AF447 disaster, their WTP data is not only wrong, but sending them the opposite way (and taking their financial forecasting and future stock prices with them when they inevitably bring prices back down to Earth).