Black 9/11: Money, Motive, technology and Plausible Deniability
For months, we have spoken of the bubble of massive loans propping the US auto market now, noting many of the same concerns we Vee highlighted repeatedly, automotive team at Morgan Stanley led by Adam Jonas , has just published a report explaining why they think the price of used cars could plant up to 50 over the next 4-5 years.
Here's the summary deluge of supply, poor lending standards and desperate OEMs who need to keep sales high cars at any price.
Off-lease offer This has already more than doubled since 2012 and is expected to increase another 25 over the next 2 years.
credit terms are extended auto loans at record lengths and residues leasing assumptions, the money factor are at levels hosting record.
The rate hike From time low auto loans.
Overdependence on auto ABS securitizations The car balance has exceeded the peak of the last cycle.
Record participation deep subprime auto ABS 32 subprime transactions were subprime FICO weighted average depth 550 in 2016 against 5 in 2010.
Record high levels of units of new car inventory inventory unit 2016YE were nearly 10 more than 2015YE and continue upward trend in 2017.
competitive price OEM Automakers capacitized a 19mm or 20mm SAAR At this stage of the cycle, we start to see more money on the hood to move the metal as car prices go down, the prices used seem relatively more expensive, requiring a decrease of prices used to balance demand imbalance of supply.
Increased penetration ADAS We expect car companies to nearly 100 penetration of active safety by 2020, creating an area of security unprecedented between new and used vehicles, the acceleration of obsolescence of stock used rising insurance premiums on older cars could accelerate this change.
Problems in the market for rental cars because of a number of secular changes, including how consumers access transportation options such as carpooling, car rental companies are facing growing stagnant, weak prices and conditions too fleeted As these cars hit the auction, the impact on prices could be significant.
All think that Morgan Stanley could trigger a 50 price of used cars over the next two years so, for you all pension funds out there collecting all AAA rated slugs recent ABS Auto deals for yield juicy, now might be a good time to examine what happened to investment grade MBS structures tranches in 2009 when house prices crashed by similar amounts.
excluding rental volumes have doubled since 2012 and are expected to worsen in turn, credit standards have progressively gotten worse and worse.
As further revealed by the increasing share of subprime loans in the deep auto ABS transactions.
Of course, until now negative equity hasn t been a problem for car buyers because lenders were too willing to roll the debt balances to new loans and, thanks to low interest rates and stretched terms the consumer peace haven t really supported the balances of debt are ballooning as their monthly payments remain low.
Meanwhile, none of the warnings about a flood of used cars volumes about to hit the market impacted volumes of new cars driven on the dealers.
All this means that rather brutal perspective of the price of used cars.
Dear OEM, the first step is to admit you have a problem.
Morgan Stanley price of used cars 50% can USChina Crash News, morgan stanley, used prices.
Stanley
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