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uh-oh not this again...

In November 2014 about 22% of Dodge cars and trucks were financed at an interest rate of 10% or higher. The Chrysler and Fiat brands also have a higher percentage of customers financing their purchases with high interest loans than the overall industry. What that tells me is they are definitely attracting a customer with less than stellar credit rating, and nobody wants to be doing this volume of business in this space over the long term.”
FCA Feels The Crunch - Daily Kanban
 

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Does that mean that these people are likely to default on their loans? That's not a good thing...

“the company has been willing to provide car loans and leases to people with subprime, or risky credit scores"
Is it that FCA attracts those customers, or more that they are just willing to sell to those customers?
 

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It just seems to me that people should go and get a used car instead of buying a new car with a sub-prime loan. I guess they have the right to take the risk, but it scares me at the macro-level.
 

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It just seems to me that people should go and get a used car instead of buying a new car with a sub-prime loan. I guess they have the right to take the risk, but it scares me at the macro-level.
Most fear the experience of buying a used car, all the things they'll be unsure about. Buying new, there's not nearly as many things to consider.
 

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Been out of the used and new vehicle buying game for a while but i wouldn't be all too surprised if used vehicle loans go as thinned out as new vehicle loans have been, same business model.
 

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Been out of the used and new vehicle buying game for a while but i wouldn't be all too surprised if used vehicle loans go as thinned out as new vehicle loans have been, same business model.
So instead of people making the choice to buy what they can afford, they instead push themselves to the limit of what they can get authorized for, whether that's a new car or a used car?
 

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So instead of people making the choice to buy what they can afford, they instead push themselves to the limit of what they can get authorized for, whether that's a new car or a used car?
Yes, that is the reason for a longer loan term. Longer loan term, smaller payments spread out over that time compared to a shorter term with higher payments. You end up paying a lot more in the end, doubt its a move anyone responsible would consider.
 

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Is this going on just in the US, or also in Canada? Is it just some states? I just figured that there would be some regulations against sub prime lending after the 2008 crisis.
 

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So instead of people making the choice to buy what they can afford, they instead push themselves to the limit of what they can get authorized for, whether that's a new car or a used car?
Car buying is done now on what the monthy nut is. Not so much the total lifetime value of the loan which at 8 years will leave you so upside down its nt even funny. Nope doesn't matter, its all about that $250/mo....
 

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I think that even people who can afford higher monthly payments may end up opting for longer loan terms because they get more spending money each month. That isn't sound financial planning, but people care more about short term happiness than long term usually. And it makes sense that car companies push longer loan terms since it makes them more money.

I just feel like these people need to talk to Suze Orman. LOL
 

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That's horrible financial decision making right their.
Why would you want to spend more than you have to, especially if you can afford higher monthly payments. I rather not pay thousands more than needed.
 

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I know it doesn't make sense from an objective position. I'm just saying that I think people are easily roped into longer loan terms when they are told, "well, you could have a year longer loan term and then your payments would go down by $120 a month." Many people would be convinced by that.
 

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I know it doesn't make sense from an objective position. I'm just saying that I think people are easily roped into longer loan terms when they are told, "well, you could have a year longer loan term and then your payments would go down by $120 a month." Many people would be convinced by that.
only if they're strapped financially and bad at math. That $120 you 'save' per month is actually lost to the higher long term value of the loan...
 

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Remember that a lot of people aren't actually that financially educated. If the sales person tells them they can afford the loan if they go with the longer loan term, they are like, "look at that, I can afford it." They don't expect sales people to sell them things in agreements that really aren't that great for them.

Do you guys know if al auto companies offer these kinds of loans, or is it just FCA (and maybe some others) who are offering the sub prime loans?
 

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Remember that a lot of people aren't actually that financially educated. If the sales person tells them they can afford the loan if they go with the longer loan term, they are like, "look at that, I can afford it." They don't expect sales people to sell them things in agreements that really aren't that great for them.

Do you guys know if al auto companies offer these kinds of loans, or is it just FCA (and maybe some others) who are offering the sub prime loans?
True, once credit rating and other factors give them the all clear, it's pretty much a done deal at that point.

Fortunately with the type of buyer most truck buyers are, it probably happens not nearly as often with buyer types of other vehicles.
 
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