{"id":1778937,"date":"2022-12-18T06:03:38","date_gmt":"2022-12-18T11:03:38","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1778937"},"modified":"2022-12-18T07:03:25","modified_gmt":"2022-12-18T12:03:25","slug":"elon-musk-auto-loans-could-be-source-of-biggest-financial-crisis-ever","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/elon-musk-auto-loans-could-be-source-of-biggest-financial-crisis-ever\/","title":{"rendered":"Elon Musk: Auto Loans Could Be Source of &#8220;Biggest Financial Crisis Ever&#8221;"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">24<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Felon-musk-auto-loans-could-be-source-of-biggest-financial-crisis-ever%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1778937&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>The automotive market may be under stress as several experts call for a massive wave of repossessions in early 2023, with prominent figures like Tesla founder <a href=\"https:\/\/www.theepochtimes.com\/t-elon-musk\">Elon Musk<\/a> and Ark Invest\u2019s Cathie Wood sounding the alarm about the potential impact on financial markets.<\/p>\n<p>\u201cPotentially the biggest financial crisis ever,\u201d Musk posted on\u00a0<a href=\"https:\/\/twitter.com\/elonmusk\/status\/1603811376681451520?s=20&#038;t=UVVVfCaoFJ2W9Tl__QVivg\">Twitter<\/a>\u00a0Friday in response to a tweet by Wood and a series of tweets from the CEO of a car dealer group about the potential auto loan crisis.<\/p>\n<p>Reports by the anonymous Twitter account CarDealershipGuy <a href=\"https:\/\/twitter.com\/GuyDealership\/status\/1603794722140688384\">revealed<\/a> an \u201cextremely alarming\u201d trend among auto lenders. The CEO behind the account claimed that many lenders are ignoring red flags associated with loan applicants who are already \u201cunderwater\u201d on a prior auto loan.<\/p>\n<p>\u201cThis morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending,\u201d CarDealshipGuy, who authors a <a href=\"https:\/\/dealershipguy.com\" target=\"_blank\" rel=\"noopener\">newsletter<\/a> for auto market insights, wrote on Twitter, catching many people\u2019s attention.<\/p>\n<p>\u201cI\u2019m now convinced that there is a massive wave of car repossessions coming in 2023.\u201d<\/p>\n<p>He went on to explain that many people had no choice but to buy a costly car during the pandemic. He said car values have been falling recently, with some dropping by nearly 30 percent year on year.<\/p>\n<p>\u201cAnd these same people that took out these big loans are now \u2018underwater.\u2019 Basically, they owe banks more on these cars than they are worth,\u201d he stated, adding that the banks are well-aware of the problem.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">This morning I discovered something *extremely* alarming happening in the car market, specifically in auto lending.<\/p>\n<p>I&#8217;m now convinced that there is a massive wave of car repossessions coming in 2023.<\/p>\n<p>Here&#8217;s what I discovered (and what no one knows):<\/p>\n<p>\u2014 CarDealershipGuy (@GuyDealership) <a href=\"https:\/\/twitter.com\/GuyDealership\/status\/1603794722140688384?ref_src=twsrc%5Etfw\">December 16, 2022<\/a><\/p>\n<\/blockquote>\n<p>CarDealershipGuy, who wished to remain anonymous, told The Epoch Times that many of these underwater borrowers are attempting to purchase additional vehicles, despite having unpaid debts on their prior <a href=\"https:\/\/www.theepochtimes.com\/t-auto-loans\">auto loans<\/a>. He is hearing that 35 to 40 percent of new subprime applicants already have outstanding debt, he said.<\/p>\n<p>Normally, banks would consider this a warning sign and refuse the loan, but the dealer said that 65 percent of his associated lenders are issuing the loans anyways.<\/p>\n<p>\u201cI\u2019ve been in the business for a decade and this is completely unprecedented.\u201d<\/p>\n<p>When asked about whether large institutional banks are involved in this lending, he said, \u201cSome of the big household names that you and I know are participating in this.\u201d<\/p>\n<p>He described the dynamic further on Twitter.<\/p>\n<p>\u201cThe lender lets the consumer buy the car KNOWING that they already have an open auto loan with another bank!\u201d wrote the dealer. He hypothesizes that banks are making this choice strategically, assuming that customers will default on their previous loan\u2014issued by a competing bank\u2014but continue making payments on the more recent one.<\/p>\n<p>He referred to the dynamic between competing banks as \u201cdog eat dog style.\u201d<\/p>\n<h2>Declining Values<\/h2>\n<p>CarDealershipGuy\u2019s Twitter thread caught the attention of Cathie Wood, head of the investment management firm Ark Invest, who <a href=\"https:\/\/twitter.com\/CathieDWood\/status\/1603810994782101504?s=20&#038;t=27XIa5XJEBzlKmjBlZ2A4Q\">expressed<\/a>\u00a0concerns about \u201cthe impact of declining residual values on the $1+ trillion auto loan market.\u201d<\/p>\n<p>Wood, who <a href=\"https:\/\/www.etf.com\/sections\/etf-league-tables\/etf-league-table-2022-09-29\">manages<\/a> assets\u00a0over $14 billion as of September, added that this crisis might be exacerbated as more consumers opt to purchase electric vehicles, further diminishing the prices of gas-powered cars.<\/p>\n<p>Elon Musk responded to Wood\u2019s tweet, echoing the same concerns.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">Potentially, the biggest financial crisis ever<\/p>\n<p>\u2014 Elon Musk (@elonmusk) <a href=\"https:\/\/twitter.com\/elonmusk\/status\/1603811376681451520?ref_src=twsrc%5Etfw\">December 16, 2022<\/a><\/p>\n<\/blockquote>\n<p>Musk has been an outspoken critic of the Federal Reserve\u2019s hawkish interest rate policy, <a href=\"https:\/\/twitter.com\/elonmusk\/status\/1597878869910253569?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1597878869910253569%7Ctwgr%5E6f82ee5f309f2e7047c3bd24e8b3cbba64534a36%7Ctwcon%5Es1_&#038;ref_url=https%3A%2F%2Fwww.cnbc.com%2F2022%2F11%2F30%2Felon-musk-says-the-fed-must-cut-rates-immediately-to-stop-a-severe-recession.html\">posting on Twitter<\/a> last month that the \u201dFed needs to cut interest rates immediately.\u201d Since the start of the year, the U.S. central bank, led by Chairman Jerome Powell, has raised its overnight lending rate from near-zero to over 4 percent.<\/p>\n<h2>Ticking Time Bomb<\/h2>\n<p>As The Epoch Times covered in November, the post-COVID boom and corresponding chip shortage caused car prices to <a href=\"https:\/\/www.theepochtimes.com\/could-auto-loans-be-the-source-of-the-next-crash_4839420.html\">explode<\/a> throughout 2020 and 2021.<\/p>\n<p>Car dealers were forced to overpay for their merchandise and, in turn, overcharged banks that were providing <a href=\"https:\/\/www.theepochtimes.com\/t-auto-loans\">auto loans<\/a>. Lucky Lopez, a Las Vegas-based auto loan broker, told The Epoch Times that loans originated throughout 2021 far exceeded the values of the underlying vehicles.<\/p>\n<p>\u201cThe dealers started calling banks, \u2018Hey man, I gotta sell this for 150 percent, 160 percent of LTV [loan-to-value] \u2026 Can you do this?\u2019 and banks that traditionally wouldn\u2019t, started doing it,\u201d Lopez said, paraphrasing the industry dynamics he had witnessed.<\/p>\n<p>For perspective, the online loan broker LendingTree <a href=\"https:\/\/www.lendingtree.com\/home\/mortgage\/u-s-mortgage-market-statistics-2019\/\">quoted<\/a> the average LTV ratio for an auto loan in 2019 at 87 percent.<\/p>\n<p>Lopez is also calling for a massive wave of lender repossessions, which could spell trouble for the automotive market. After repossession, cars typically go to auction, but banks are reluctant to commit to an auction sale, where it\u2019s <a href=\"https:\/\/shift.com\/articles\/how-much-do-cars-sell-for-at-dealer-auctions\">difficult<\/a> to fetch even 100 percent of a car\u2019s value.<\/p>\n<p>As a result, banks have largely refused sales and continue to delay the auction process, <a href=\"https:\/\/www.youtube.com\/watch?v=1lpceQT4pWk&#038;t=3038s\">according<\/a> to Lopez.<\/p>\n<p>The lack of sales is causing a supply glut, which is a ticking time bomb, according to former adviser to the Federal Reserve Bank of Dallas Danielle DiMartino Booth.<\/p>\n<p>\u201cThis massive overhang of inventory continues to grow on a weekly basis because the lenders don\u2019t want to recognize the loss on the loans,\u201d Booth said in an interview on the Forward Guidance <a href=\"https:\/\/www.youtube.com\/watch?v=OgFiU_RIcx4&#038;t=3141s\">podcast<\/a>.<\/p>\n<p>She predicts that regulators will step in at some point and question why lenders haven\u2019t liquidated the cars and force them to sell. Booth added that this \u201cis what regulators did in the housing crisis.\u201d<\/p>\n<p>\u201cThey\u2019re going to make them clean those loans off their books, and then we\u2019ll see used car prices fall.\u201d<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-liam-cosgrove\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/11\/LiamCosgrove_WEB.jpg\" alt=\"Liam Cosgrove\"   style=\"display:none\"><\/a>\n\t\t\t\t\t<\/div>\n<p>Liam Cosgrove works as a freelance journalist covering business, markets, and finance. He received his bachelor&#8217;s degree in mathematics from the University of California, Santa Barbara.<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The automotive market may be under stress as several experts call for a massive wave of repossessions in early 2023, with prominent figures like Tesla founder Elon Musk and Ark<\/p>\n","protected":false},"author":1,"featured_media":1732864,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[547],"tags":[8710,9992,5458,6170,4249,6070,4263,5974,4250,3819,9993],"class_list":["post-1778937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-bongino-report","tag-biggest","tag-auto","tag-bongino","tag-crisis","tag-elon","tag-ever","tag-financial","tag-loans","tag-musk","tag-report","tag-source"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1778937","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1778937"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1778937\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1732864"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1778937"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1778937"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1778937"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}