Celadon on the ropes...

i got those offers as well from toyota, when i had bought mine back in 2010...now i get those offers to trade in my lease cars, no down payments, and the same monthly payments...

dealers are in short supply of good low miles, used cars, (and preferably no previous accident damages. this told to me by my dealership)

 

Yeah, it because most of these are going to the credit vultures to use as an SDO at high financial interest rates, and they use them as a rolling monthly income return financial vehicle.

SDO = Secured Debt Obligation, means they will finance anyone no matter the credit, because there is a physical, asset backed collateral return item

That's the purpose and reason it exists. Its the exact same thing that happened in the housing crash and resulting bailouts. You give loans and extended lines of credit to a class of borrower that anywhere else on the planet would be turned down, because they're whats considered to be a negative equity borrower, and the risk of default is greater than 80% for whatever the asset class is.

Default, no problem, repo, flips the asset, new borrower in 2 weeks, income positive again.
Homes, no problem, foreclose, flip or lease, new borrower, income positive again, rinse/repeat

The problem you run into, is that only works when the entire financial vehicle or asset class:
DOES NOT DEFAULT AT THE SAME TIME INDUSTRY WIDE!!!

That's exactly what happened in the housing crash.

All those investment funds and banks and hedge funds were highly leveraged in those CDO's (credit obligations with physical asset backed items, IE.. HOMES) and then a assload of things defaulted at once, and all of those banks and funds leveraged and hedged had to make due and didn't have the funds for it because its invisimoney, as in papermoney, its on paper but not actual, real money.

Youre seeing, and have been seeing the exact same thing happen with cars.
Go look at how the whole CDO structure started with the home mortgages, and then look at the investment vehicles, or ETF's these company's have for that asset class, its the same.
Here's an example of mortgage backed ETF's



Lady's and gents, welcome to the term "subprime" lending.



STRUCTURED FINANCE
Sub-prime auto puts more junk in trunk
08 Jun 2018 10:46
2 min read
Americas
Joy Wiltermuth

Car finance companies have pushed into fresh territory this year by selling Single B rated debt backed by loans made to sub-prime borrowers.

Selling Double B bonds was a bold trade not so long ago but as demand has grown for riskier assets, auto sellers are now able to sell further down the capital structure.

“It would appear that investors have grown comfortable with this collateral,” S&P auto ABS analyst Amy Martin told IFR.

“But some investors who are buying this class stand to lose principal if losses are just mildly higher than expected.”

American Credit Acceptance, First Investors, Foursight Capital, United Auto Credit and Westlake have each sold Single B bonds this year, according to Intex data.

By migrating to Single B from Double B, investors can pick up a bit of the spread that has vanished from less risky classes.

Last summer Double B spreads sank to a post-crisis low of around 300bp. But by last month, Westlake had cleared its Double B notes at 205bp, according to IFR data.

Its Single Bs fetched 325bp to yield 6.1%.

“It will be one area to watch,” a senior ABS banker told IFR this week.

“We used to say that the Double B window was not always open. Now multiple companies are selling Single Bs.”

Speculative grade bonds often widen when markets lurch into choppy territory.

Roughly a week after Italian political turmoil shook parts broad swathes of the market, ABS investors turned to safe-haven Triple As from Hyundai and DriveTime.

That was a departure from much of this year when investors plowed orders first into anything lower rated and higher risk.

In addition to volatility, a specific challenge for sub-prime auto investors has been rising loan losses.

Net losses climbed in each of the past six years, reaching 7.62% in March according to S&P’s sub-prime auto ABS index.

And while only two defaults so far have occurred in sub-prime auto bonds rated by S&P - both Double B tranches - that could change as higher-risk bonds are sold.

Rating agencies warned that the Double B class of Honor Finance’s one and only sub-prime auto securitization could be downgraded. nL5N1SW5A4

“We do expect that the next economic/auto downturn will shake out the weakest ABS issuers from the current long list,” JP Morgan analysts wrote last week.

“However, auto ABS bonds are still very well structured to withstand stress, including possible seller/servicer events.”

 

We are holding on to ours. The reasoning being no monthly payments in this environment and we know what the vehicles little behaviors are like. Especially the tahoe. The other car as long as the electronics are holding up alls well. We replaced a 1000 dollar throttle body once already after the elctronics in it burned up. Im glad the damage was electrically limited to that item. There were three other devices in binary tied to that throttle body and if they got damaged from feedback, splash back, short or whatever or worse uneven voltage reporting across the harness group in particular there will be a need to dispose of the car. Repairs would have exceeded 5000 dollars.

Then again we don't know if we will commit to something like that. My vehicle is now a large fridge hauler if need be or more commonly a sleeper back there. You can sleep two with the back seat gone. (taken out) So it will save on hotel bills. I'll have to have a interior shop for vehicles install a custom system of privacy curtains from the rear of the front seats all the way back to the back glass. So that the entire space is light proof and private. I'll have to do a few other things to that space. Sleep in a big rig all the time, it's one thing. But in a smaller vehicle like that? Where no one can see past the curtains? Its going to be interesting.

 

That last post is awesome.

I am pretty familiar with the used car side through years of auction work when not involved with big rig sales which is my first job description as a crew boss herding CDL temps. The dealers fight each other and set the price of a used car to the winning bidder. Auction gets 30% in fee I think. So that is cost and is added on, then other costs to get the car there to the lot, detailed fixed, cleaned up and offered for sale to the public +30% markup.

New cars are just getting BS nanny this nanny that nanny everything all that is driving up the costs to unaffordable levels. We saw this before in the late 70's again in the late 80's and again in the 90's and again and again and again and it's happening now again.

You would think I march into dealer with a fistful of dollars and bark at them minons to make a vehicle ready right quick we are buying it today, no talking, negotiating none of that. Pay that price get tags and go home. Pay revenuer 10% and get title.

Reminds me of a old saying.

Some days you smile at the Bank.

Other really good days the Bank smiles at you.

 

Sidetracked, sorry.
Working on a project this evening
Later on I’ll stick up some stuff I've been pulling research on with regards to this CDO/SDO as it pertains to trucking, which seeing all this celadon stuff, falls in the same category and is related

 

That's called self driving trucks, except that will be millions of jobs. Don't tell me it won't happen either, they're already running. Prepare

 

Anyone know of any updates, re: Miss @laaylor ??? (Still in your corner, ma'am~!!)

 

Just finished up and walked my last walk out of the terminal....it’s sad and it was hard... did convoys returning equipment to the yard Monday and Tuesday.. Now; working out where my new home is to be.. I think I know: but, not ready to say yet.. still deciding..

 

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Briggs: Celadon’s failure breaks the promise founder Steve Russell made to his drivers