LJ: credit crunch affecting consumers yet?
 

I thought you would have a personal view on this; how tight are the bank's assholes right now? Are they still giving out money?

Is anyone coming in to buy right now - are they jumpy?

I was wondering this too. The car lots here seem deserted, but then I'm not sure they didn't always...

i'm just leaving for the day...but i'll reply to this tonight.....see me in chat after 9 pm!

go beer!

Okay, so for those of us whose real lives have seriously interfered with their internet time the last few days... Can someone sum up the chat reply?

Hasn't happened yet, has it? (the chat, I mean...)

As a home-seller, I can honestly say that THIS MARKET SUCKS!!!!1!!11one

Not a single blessed buyer out there. We are considering taking it off the market and renting it out to a friend, if we can.

3 - 4 houses in my neighborhood have all sold in the last 2 months.

Probably at far reduced prices or with whopping concessions.

Only my hairdresser knows for sure. When I went in for a haircut yesterday, she told me that many of her regular customers are cutting back on visits (no pun intended), and she is beginning to feel the impact. As for home sales, I mentioned in another thread that there are alot more houses with "for sale" signs on them in my small town, and those signs are staying there.

I would like to hear the assement of the new car industry lending as well. We would like to buy a new car and trade my wifes sequoia in for a Mini Cooper.

in a word....... cock.

oh, wait.....

the banks...
yeah.

ok, so, they've mostly changed in some way. HSBC quit the indirect lending business, so we lost them as a source, and a lot of folks lot their jobs. Capital one has tightened up considerably.....they used to buy anyone with a certain minimum credit score, and minimal credit history....

Also, they are limiting advance amounts on SUVs and trucks. they'll lend you 85% of invoice or trade value on a suv, where they'll lend 115% on a car.

Our captive (NMAC) source has just recently held a meeting telling all of the buyers to limit exceptions. They also changed their advance structure for the worse. There are less specials out there on leases, and they are reserving the incentivized rates for those with excellent credit scores.

as an example....we can barely give a pathfinder away at this point due to gas prices.....so, the rate is 0.9 for up to 72 months if you score over 740. if you are 700-739, it's 3.9 660-699 4.9, 630-660 is 7.9.

fortunately, there are banks that have not changed the way they buy or advance and rate sheets. TD Bank, Citizens, M&T, 5th 3rd....all remain unchanged.

the biggest change, obviously is with the sub prime lenders.

We have decided to put our impetus on used cars instead of new. because if nissan is gonna let us twist in the wind...then fuck em...we make more on used cars anyway.

The bottom has fallen out of the big car market in Australia too. 4WD's and the thirsty cars are just not selling.

Where this IS going to be good, is that we should see a greater development of the hybrids - and with bigger sales, hopefully a more affordable price

But I keep getting tons of unsolicited credit card and remortgage offers in the mail. I was hoping they would dry up. :eyebrow:

Hi there Minx you hardcore lurker!

I live in Adelaide too.

A mate of mine in Eden Hills is converting Hyundai Getzs to pure electric. They have about the same performance as a regular Getz, about 100 km range and cost about $38,000 to buy, but less that $1 per 100 km to run!!!!!

Not entirely true.

In the last 4 weeks, the car market has suffered across the board, large cars and 4WDs are not reducing at a more rapid pace. In fact, muscle car and large car sales are doing better now than they have for the last few years.

Ford Territory and Holden Captiva...being HUGE fuel hogs are selling really well and even with diesel being soooo expensive, 4WD sales are up.

Used car sales are a lot harder than they have been, because the franchises arent making target, so they are offering great deals.

Lenders are strictly by the book and sticking to their guidelines, whereas previously you could get them to bend. The high risk lenders arent taking on clients that they would usually take on without any hesitation.

This article indicates that in Australia, sales of commodores (V8 Sedans) are down and corollas are up, and so are SUVs. Equally the small Mazda 3 has passed the big Falcon.

The only effect of the current upheavals I have felt is that I have a large stash of Yen which has appreciated by about 15% in the last month. :D

LJ... or anybody else who has thought.... why the hell would a bank lend somebody 115% of the price of a car? I mean, yeah, I'm sure they check the credit ratings they'll only give it to people who are good for it. :3_eyes: But it just sounds like a bad move on the face of it.

LJ gets the extra 15%.

car sales 2008 vs 2007
 

If you are a good risk, TD bank will actually lend 130% of retail value. why? because many people are carrying negative equity from one car to the next. Or they don't have liquid cash to put down to cover the tax and tags. They are in business to lend the money, so the more they can lend to customers that have demonstrated their reliability,the better..... and the safer that money is out there earning interest.

If you are sloppy about repaying your debts, or have limited ability to repay...they impose limits to mitigate their risk....such as max amount financed call backs, or payment ceiling stipulations. OR...they offset that risk with potential greater rewards....ie..higher interest rates. If they're going to have to call and remind you to pay, or initiate collection activities, they want to be compensated for that expense.

money
 

I've spent the last 4 months in Alice Springs,as a random sample, 2/3 of those I worked with were trying to get rid of their 4WD's.

Perth, WA - the Texas of Australia - is even seeing a decrease in the petrol guzzlers.

Credit Cards? Me too, at least once a week,some bank is trying to give me one. Or Amex or Diners Card.

Thanks for that chart Bruce. I new it was bad but it is worse than I thought.

Bruce, are those numbers US or worldwide?

Got to be US

I think it's US, but can't swear to it. :confused:
I wonder how much of the drop is actually a shortage of money/credit by the consumers, vs nervousness about the news?

I saw a TV show last night that said in Britain, home mortgage applications are down 98% (!!!!!) on 12 months ago.

I think I heard that right. If I did, that means that section of the economy has basically stopped dead. Housing drives a lot of the economy. I hope I heard it wrong.

In order to create more debtors, creditors need people to borrow money on disposable items such as couches, computers, and even cars. Nobody in their right mind borrows money on items that neither create wealth nor maintain value. And yet that is exactly what the rich need to maintain their creditor status - to get rich while everyone works more hours.

If you cannot afford the car, then you don't buy it. Creditors love it when the debtor also takes out a car loan. Means there will always be more debtors.

If you need the car to drive to work to make money to buy the car, then you buy it.

A car is unique amongst things you buy on credit, because the car itself is collateral for the loan -- and, unlike everything else you buy on consumer credit, does not quickly lose value and can easily be moved to where it can be sold to cover the debt. (Because it has wheels.)

If you are uncertain about your ability to pay for it, you can buy "gap insurance" which LJ will explain to you in detail.

Or you take mass transit, or car pool, or move near to work, or get a job you can afford ... a car is not a necessity. Almost anyone can get a car without taking out loan. There are plenty of simple working cars for only a few $thousand - no car loan required.

Car loans keep creditors as creditors. Do you buy your clothes using a loan? Of course not. Those are also necessary for a job. But only a fool or the financially destitute take out loans for clothes.

They *need* the SUV? Therefore they need a car loan? Nonsense. This is how debtors remain debtors. To make it easier to remain a debtor - gap insurance? Just another bill to make it easier for a debtor to remain a debtor. To make it easier to finance a luxury car he does not need and cannot afford.

There are many solutions - all without car loans. The person who *needs* a car loan is typically so financially destitute as to be one step away from bankruptcy. No financially responsible person needs a car loan. But car loans are how to live fast today - while enriching the creditors and remaining a debtor.

Equally foolish are the many who will maintain a credit card balance so as to keep money in a savings account. Just another way to remain a debtor and just as foolish as taking out a car loan.

I completely agree. That's disturbing.

What next? Something that Radar says that will make perfect sense too?

I agree as well, but there are people out there, more than you think too, who don't have "a few thousand dollars" - sad but true. And it looks like their numbers are going to increase.

A few years back I was in immediate need of a car and had just started a new job that was about 20 miles from home. My job also required that I go out on sales calls from time to time. The situation presented basically required me to have a car, let alone that I had kids and all that goes with them.

I had poor credit was in debt and didn't have any money to buy an appropriate vehicle.

I went to several banks/lenders - no one was wiling to lend me the money, and I can't blame them. I wouldn't have either. I discussed the situation with my new boss and we settled on a $4000 advance. I paid off the advance as agreed and I got a car that lasted for years until my financial situation improved and I got it without a monthly payment.

I guess my point is that there are other options whereby one can get a car and do it in more creative ways to accommodate the needs and situation presented.

Apparently, if you opened a mortgage between 2005 and 2007, it may effect the risk rating you get on some lenders' internal 'scorecards'.

I won't mention the Lender (what's in your wallet) but they priced this customer's loan at 5.49% x 63 months, where I had 3.54% at Chase and 3.49% at 5th 3rd and Citizens.

Customer has perfect credit, and a good equity position...so I questioned the buyer about the rate. He said that the mortgage(s) -- he has a primary and a second--- were dated 4/05 right when housing values were AFU, and their computers figure that into the equation for risk based pricing.

sonofabitch

We sat on our asses for the last couple years and didn't look into refinancing the house because we heard credit was tight.

Wells Fargo, who owns our mortgage debt, sent us a letter the other day offering us a refinancing deal where they just send us the papers, we sign them and get them notarized, and there are absolutely no closing costs.

My wife called them for the details.

The rate they are offering us is 0.35% higher than what I could find in a quick Google search as the supposed market average right now. But I wonder if those lower rates are with points being paid. This is no closing costs, and it's certainly convenient. Just sign the papers and mail them back.

We just have to decide now if we want to pay $110 a month more so we can pay the house off 8 years sooner with a 15 year loan, or get $20 a month back and pay the house off 3 years sooner with a 20 year loan. We've got 23 years left on our 30 year loan. The 15 year loan would save us a ton more money over the long run. We'll probably do that.

Anyway, I'm glad this fell into our laps. We probably wouldn't have gotten around to refinancing if it hadn't. I wonder if this is some sort of federal program, and if I should be thanking Obama.

Fuckers! Good thing we can't afford to buy anything right now anyway.

Glatt, I can't advise you to do anything but if I were the one with that offer I'd take the 20 year note but send payments consistent with the 15 year payoff. If you find yourself in a situation where you have to cut your budget it is easier to send in the lower required amount of money that month than trying to scrape cash together somewhere else. Of course, if you are sitting on a large safety cushion and can't think of a time where $100 will matter either way the 15 year note probably has a slightly lower rate and would be better. YMMV.

Also, you don't really need to send Obama a thank you note. You're probably the beneficiary of an attempt by Wells to clean up their books to increase their own credit rating. Banks borrow the money they lend and analysts look at the date of loan origination as a part of that calculation. Loans made during certain time periods are considered more likely to go delinquent and default so the easiest thing to do is give the same consumer a new loan with a different origination date. Good for you.

Thanks lookout. I hadn't thought of that angle. We'll need to mull that over as well. I wonder how hard it is to set up automatic payments where you are sure they will apply the extra $100 each month to the principle. I'm all about being lazy. If I have to write a note with a check each month, it isn't going to happen.

Are you opposed to online payments? Most banks have that option nowadays.

I'm fine with automatic payments. Honestly, my wife handles setting them up and I don't know how she does it. I don't think it's online. I think it's through our bank. I just don't know how you set it up to pay more and have that additional amount applied to the principle. I've heard of people sending an extra check once a year and enclosing a note asking that it be applied to the principle, but I don't know the logistics of setting up an automatic payment that's the same every month where they will apply that extra $100 or whatever to the principle. It's not something I'd want to bother with every month. I like to set stuff up and forget it.

I guess it comes down to how your bank handles it. I do have to mess with the online payment each month, but the way ours is set up, I just go to the site and enter an amount in "payment" and an amount in "extra principal" (and nothing in the other boxes like "extra escrow," etc.) and click okay. But I'm also paranoid about automatic payments, I like to sign off on everything that comes out of the bank account.

That's kinda funny. I'm fine with automatic payments, but won't do anything on the web except credit card purchases. I'm paranoid of finances on the web.

I find that 'being paranoid about finances online' is a generational delineation.

I have the ability to either print or email copies of the documents we sign for a deal....Among white collar people that seem like they are not afraid of computers, I can usually predict at this point that people under 35 will want it emailed, and those over 35 want it printed.

My problem with online finances is that I've had my own computer get viruses and be no longer under my control. I can't guarantee the security of my end of things. So my bank account numbers and stuff like that will never reside on my computer.

Conversely, I've had bank errors cause automatic withdrawals to come out of my account when they shouldn't have, and it took months of fighting to get the money back. None of it's really secure, not really.

Unless you've got some weird (to me) state specific interest law, any over payment is automatically applied to principal.

When I got my first mortgage, I tried to send extra money with the payments, but they refused to take it unless I sent the exact equivalent of one months principle payment. Of course every month the principle was different, which meant a tortured phone call trying to determine the amount.

Oh, and I've had them put the overpayment in the escrow account, too.

I was talking about this to my wife last night, and apparently they send quarterly statements on the mortgage. Those statements include a coupon to use if you want to make an extra payment to be applied to the principle. So I think we'll probably go with the 20 year note, do automatic deductions for the exact amount, and just use those coupons each quarter to make an extra principle payment with a check.

It's nice to have the choice be between different good options. That never seems to happen. Usually it's "Do you want the shit sandwich or the shit soup?"

If you do automatic deductions will they continue to send a coupon book?
I'm betting you'll always find something you'd rather spend the money on, than send some extra to the mortgage company.
You may have more discipline, but you'd be bucking the odds.:D

We do the automatic deductions now and they send the coupons.

And you're probably right. We could have been doing the extra payments all along with our current note, and haven't been. But I think if we get in the habit of it, we can do it. Even if we don't, we're still saving money and paying the house off sooner.

Paying the mortgage is something I didn't think much about. The rent/mortgage was just a fact of life, something I did every month like utility bills. Even when I re-mortgaged and shortened the note, it was just something to pay every month, until one day I got a letter saying the next payment would be different, because it was the last. Surprised the shit out of me. :haha:

financial discipline is just a habit. either you make the choice to cultivate it or not. some people who are paid biweekly even go so far as to set up auto payments for half of the mortgage payment with each and every paycheck. That effectively makes one extra payment per year. That extra payment plus the interest that wasn't compounded typically pays a 30 year mortgage off in roughly 22 years.

Oh wow. I don't own a house, but I need to start paying attention to my finances! It's ridiculous. I'll be getting a bonus soon that will get me out of the debt I accrued getting my teeth fixed, then I want to start saving so this doesn't happen again.

I may pick (or even eat) the brains of some of you gurus!

LJ, you mentioned that HSBC got out of lending for cars.

Does that have anything to do with the letter I got informing me that some bank I never heard of bought my car loan? Or is selling loans something that just happens these days? I never had that happen before...