The banks and investors have moved away from real estate. Now they are into auto loans. They have moved from loaning money on something that doesn’t move and will hopefully go up in value to loaning money on something that moves a lot and definitely goes down in value each month. Banks and lending institutions are moving into sub-prime lending on cars. That’s right. What they did before with real estate, they are now doing with automobiles. The banks and lending institutions loan money to lots of sub-prime folk. They stretch out the loans longer than before. (It used to be loans were for no more than 5 years (60 months). Now they are moving towards 72 months and longer.) These lenders bundle these loans then take them to Wall Street where they are sold as securities. If the economy falters, what is going to happen with these loans? What will happen if a bunch of these cars get repossessed?
Take a look at the Truth About Cars http://www.thetruthaboutcars.com/2013/06/all-is-fine-in-sub-prime-land-says-some-with-a-vested-interest-in-its-success/ citing the Detroit Free Press at http://www.freep.com/article/20130620/BUSINESS0104/306200121/auto-sales-lending-subprime. The credit and car folk say there is nothing to worry about. Can you believe that? Do you believe that? People are spending money, yes. Is it wise? That remains to be seen. Have people paid down their debts? Has the government? Remember, when the banks started to fail, they went to the government...to us. We bailed them out. Now it appears they want to do it again. What will happen this time?