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Big auto lender only checked 8% of applicants’ incomes

NEW YORK (CNNMoney) — Nearly 107 million Americans have an auto loan.

It’s a record high, and there are growing concerns that many people who obtained their car loans couldn’t really can’t afford them.

Alarm bells are ringing because one of the largest subprime auto lenders in the nation — Santander Consumer USA — only checked the incomes of 8% of its applicants, according to a new report from Moody’s Investors Service. Subprime refers to loans made to people with poor credit.

“A lack of income verification…creates more uncertainty around whether borrowers will be able to afford their monthly payments,” Moody’s wrote.

By comparison, Santander’s main competitor auto lender AmeriCredit verified 64% of applicant incomes.

Santander’s behavior is very much reminiscent of the practices that led to the home loan crisis where people were getting home mortgages who clearly should not have. The difference is that car loans are smaller and make up a smaller portion of the overall economy.

But it’s not surprising that losses at subprime auto lenders are at the highest rate since the aftermath of the Great Recession. SP Global Ratings found that losses on subprime auto loans in January hit 9.1%, the worst level since 2010.

“The warning bells are blaring too loud to ignore any longer,” says Erin Mahoney of the Committee for Better Banks, a group advocating for reform.

Santander is pushing back by saying that it looks at many metrics to determine if someone should get a loan. Proof of income isn’t always the best indicator of whether someone can repay a loan, some say.

“We are entirely committed to treating our customers fairly and lending responsibly,” a Santander Consumer USA spokeswoman told CNNMoney. “We consider a wide range of factors to manage and price for risk.”

Moody’s points out that this doesn’t mean it’s time to panic. The auto loan industry is much smaller than the home loan market. Even if a lot of people do default on their car loans, it wouldn’t rock the global economy in the same way the mortgage crisis did.

“The size is not comparable,” says Nicky Dang, a vice president at Moody’s.

People don’t need to take out nearly as much debt to buy a vehicle. While the typical American home costs around $200,000, the average new car is about one-sixth that amount, or under $35,000.

Dang also says that while auto loan defaults have risen recently, they are “definitely not that high” compared to historical trends.

The other key difference is that nearly all home mortgages were being packaged together on Wall Street and sold on to investors globally on a mass scale. That’s not happening at nearly the same extent with auto loans. Less than 20% of subprime autoloans are “securitized” on Wall Street, according to SP Global, a credit rating agency.

Article source: http://www.valleynewslive.com/content/news/Big-auto-lender-only-checked-8-of-applicants-incomes-424924584.html

Big auto lender only checked 8% of applicants’ incomes

NEW YORK (CNNMoney) — Nearly 107 million Americans have an auto loan.

It’s a record high, and there are growing concerns that many people who obtained their car loans couldn’t really can’t afford them.

Alarm bells are ringing because one of the largest subprime auto lenders in the nation — Santander Consumer USA — only checked the incomes of 8% of its applicants, according to a new report from Moody’s Investors Service. Subprime refers to loans made to people with poor credit.

“A lack of income verification…creates more uncertainty around whether borrowers will be able to afford their monthly payments,” Moody’s wrote.

By comparison, Santander’s main competitor auto lender AmeriCredit verified 64% of applicant incomes.

Santander’s behavior is very much reminiscent of the practices that led to the home loan crisis where people were getting home mortgages who clearly should not have. The difference is that car loans are smaller and make up a smaller portion of the overall economy.

But it’s not surprising that losses at subprime auto lenders are at the highest rate since the aftermath of the Great Recession. SP Global Ratings found that losses on subprime auto loans in January hit 9.1%, the worst level since 2010.

“The warning bells are blaring too loud to ignore any longer,” says Erin Mahoney of the Committee for Better Banks, a group advocating for reform.

Santander is pushing back by saying that it looks at many metrics to determine if someone should get a loan. Proof of income isn’t always the best indicator of whether someone can repay a loan, some say.

“We are entirely committed to treating our customers fairly and lending responsibly,” a Santander Consumer USA spokeswoman told CNNMoney. “We consider a wide range of factors to manage and price for risk.”

Moody’s points out that this doesn’t mean it’s time to panic. The auto loan industry is much smaller than the home loan market. Even if a lot of people do default on their car loans, it wouldn’t rock the global economy in the same way the mortgage crisis did.

“The size is not comparable,” says Nicky Dang, a vice president at Moody’s.

People don’t need to take out nearly as much debt to buy a vehicle. While the typical American home costs around $200,000, the average new car is about one-sixth that amount, or under $35,000.

Dang also says that while auto loan defaults have risen recently, they are “definitely not that high” compared to historical trends.

The other key difference is that nearly all home mortgages were being packaged together on Wall Street and sold on to investors globally on a mass scale. That’s not happening at nearly the same extent with auto loans. Less than 20% of subprime autoloans are “securitized” on Wall Street, according to SP Global, a credit rating agency.

Article source: http://www.valleynewslive.com/content/news/Big-auto-lender-only-checked-8-of-applicants-incomes-424924584.html

Auto Service Contracts: 6 Things You Should Know


(Photo by Justin Sullivan/Getty Images)

(Photo by Justin Sullivan/Getty Images)

Consumers continue to report receiving notices of expired vehicle warranties from firms with which they have no warranty or on vehicles that they do not own. Many fall prey to invoices that accompany these notices to extend their warranty. Here’s how the scheme works.

Consumers receive a notice stating, “Your vehicle’s comprehensive warranty may shortly expire.” The notice even offers a telephone number to call and requests that the consumer provide their VIN Number, vehicle mileage, and the “warranty expiration code” provided on the form.

If you are shopping for a new or used car, you may be encouraged to buy an auto service contract.

Auto service contracts have become increasingly popular as a way to provide consumers a means to deal with unforeseen vehicle repair problems. Before signing on the dotted line, be sure to understand the terms of the contract and know who is responsible for providing the coverage.

What is an auto service contract? According to the Federal Trade Commission, an auto “service contract is a promise to perform (or pay for) certain repairs or service. Sometimes called an “extended warranty,” a service contract is not a warranty as defined by federal law.

A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the original price.” This separate and additional cost distinguishes a service contract from a warranty.

Before deciding whether to buy an auto services contract, check out the company at bbb.org and consider the following:

  1. The Underwriter. It may be the manufacturer, dealer, or an independent company. Many service contracts sold by dealers are handled by independent companies called administrators. Administrators act as claims adjusters, authorizing the payment of claims to any dealers under the contract.
  2. Compete Cost of the Contract. The cost of the contract will depend largely on the make, model, and condition of your car. The contract cost will also vary widely from hundreds to even thousands of dollars. Even with a service contract, you a may still have some out-of-pocket expenses.
  3. Auto service contracts rarely cover all repairs. Watch out for exclusions. For example, if the contract specifies that only “mechanical breakdowns” will be covered, problems caused by “normal wear and tear” may be excluded.
  4. Handling a Claim. Determine, up front, what you will be required to do, if your car needs a covered repair. Don’t assume that you can take it to any repair shop. Some service contracts require you to go to designated repair shops only or to back to the dealer. Some contracts also require pre-authorization for a repair, before you can take it to a mechanic.
  5. Keeping Your Service Contract in Force. The car owner is usually required to keep up with general maintenance on the car, to include keeping records and receipts for this maintenance. Read the fine print; some contracts may also specify use of a certain dealer or repair shop for general maintenance.
  6. Contract Term. If the service contract lasts longer than you expect to own the car, find out if it can be transferred when you sell the car, whether there’s a fee, or if a shorter contract is available.

Be sure to carefully read the agreement and check that all verbal promises have been included. Don’t sign a contract with blank spaces that could be altered or changed. Finally, once the contract is signed, keep a copy of it for your records. Sources: BBB.org and FTC.gov.

BBB New Release: Auto Service Contracts: 6 Things You Should Know

For more information, check out Auto Service Contracts and Warranties. United States Federal Trade Commission, www.ftc.gov – not subject to copyright protection. 17 U.S.C. 403.

Article source: http://whnt.com/2017/05/27/auto-service-contracts-6-things-you-should-know/

Hunterdon Polytech team 4th in National Auto Tech Competition

FLEMINGTON - Cousins Todd Gruchacz of the borough and Jeffrey Gruchacz of Stockton, recently represented the Hunterdon County Polytech Career and Technical School at the 25th annual National Automotive Technology Competition, where they placed fourth.

The duo was selected by NJ CAR to represent the state of New Jersey on this national stage, after Jeffrey placed first and Todd third in the Automotive Service Technology division of the SkillsUSA Championship.

“Todd and Jeff have played and worked together since they were 2, and their familiarity with one another is a strength in competition,” said Christopher Scheuerman, automotive technology instructor at Polytech. “They work well together as they know each other’s strong and weak points. But, they also succeed because they put in the work and remain open-minded about learning new things.”

To prepare for the competition, Todd and Jeffrey began meeting with Scheuerman in December. All three met on their own time, after school hours, and increased the number of times they met leading up to the competition.

Todd and Jeffrey also trained for 14 days with service manager Chris Squarcia and foreman Pete Thibault of Mercedes-Benz of Flemington. The two volunteered to help train Todd and Jeffrey on a Mercedes, which was the students’ pre-assigned brand for competition.

Following their performance at the National Automotive Competition, both Todd and Jeffrey received job offers from Mercedes-Benz of Flemington and Mercedes-Benz of North America after they graduate from Polytech’s two-year Automotive Technology Program in June.

The program allows students to study all eight areas of the automobile and offers seniors an internship with the Flemington Car and Truck Family. Graduates walk away prepared to enter the workforce.

This was the fourth competition this year in which Todd and Jeffrey placed at the top.

In addition to SkillsUSA, they previously competed against 124 teams at the United Technical Institute, where they placed fourth, and at a competition organized by the Greater Lehigh Valley Auto Dealers Association, where they placed third.

The National Automotive Competition, held in conjunction with the New York International Auto Show, brought together the top teams from 30 states for two days of contests.

On day one, contestants took on the Workstation Challenge, moving through 10 stations that tested their knowledge of tools, measuring instruments, specific vehicle components, in addition to job interview skills.

On day two, the teams worked together in an allotted amount of time to diagnose and repair problems under their car’s hood.

Hunterdon County Polytech Career and Technical School is part of the Hunterdon County Vocational School District. As a public school district, it serves students from middle school to adults in a variety of career programs that result in gainful employment by partnering with businesses in the community to meet their economic and workforce needs. To learn more, visit http://www.hcvsd.org/.

Article source: http://www.nj.com/hunterdon/index.ssf/2017/05/hunterdon_polytech_team_4th_in_national_auto_tech.html

Big auto lender only checked 8% of applicants’ incomes

The future of cars: Self-driving and electric

Nearly 107 million Americans have an auto loan.

It’s a record high, and there are growing concerns that many people who obtained their car loans couldn’t really can’t afford them.

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Alarm bells are ringing because one of the largest subprime auto lenders in the nation — Santander Consumer USA — only checked the incomes of 8% of its applicants, according to a new report from Moody’s Investors Service. Subprime refers to loans made to people with poor credit.

“A lack of income verification…creates more uncertainty around whether borrowers will be able to afford their monthly payments,” Moody’s wrote.

By comparison, Santander’s main competitor in the subprime auto lender space — AmeriCredit — verified 64% of applicant incomes.

Santander’s behavior is reminiscent of the practices that led to the home loan crisis where people were getting home mortgages who clearly should not have. The difference is that car loans are for smaller amounts and make up a far tinier portion of the overall economy.

Still, there are concerns since losses at subprime auto lenders are at the highest rate since the aftermath of the Great Recession. SP Global Ratings found that losses on subprime auto loans in January hit 9.1%, the worst level since 2010.

“The warning bells are blaring too loud to ignore any longer,” says Erin Mahoney of the Committee for Better Banks, a group advocating for reform.

Related: Auto sales are slowing, and upheaval is next

Santander is pushing back by saying that it looks at many metrics to determine if someone should get a loan. Proof of income isn’t always the best indicator of whether someone can repay a loan, some say.

“We are entirely committed to treating our customers fairly and lending responsibly,” a Santander Consumer USA spokeswoman told CNNMoney. “We consider a wide range of factors to manage and price for risk.”

Related: A record 107 million Americans have car loans

Moody’s points out that this doesn’t mean it’s time to panic. The auto loan industry is much smaller than the home loan market. Even if a lot of people do default on their car loans, it wouldn’t rock the global economy in the same way the mortgage crisis did.

“The size is not comparable,” says Nicky Dang, a vice president at Moody’s.

People don’t need to take out nearly as much debt to buy a vehicle. While the typical American home costs around $200,000, the average new car is about one-sixth that amount, or under $35,000.

Dang also says that while auto loan defaults have risen recently, they are “definitely not that high” compared to historical trends.

The other key difference is that nearly all home mortgages were being packaged together on Wall Street and sold on to investors globally on a mass scale. That’s not happening at nearly the same extent with auto loans. Less than 20% of subprime autoloans are “securitized” on Wall Street, according to SP Global.

In its report, Moody’s was looking specifically at income verification of car loans that were packaged together into bonds.

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Article source: http://money.cnn.com/2017/05/27/news/economy/santander-auto-loans/

Robo-car Redraws Auto Landscape

We can count at least 10 ADAS/autonomous vehicle platforms. How will these hardware and software platforms overlap, interact and compete?

Most non-gearheads who have grown up outside Detroit have some difficulty understanding the inner workings of the auto industry, particularly how car OEMs, tier ones and component vendors mesh together to get millions of cars off the assembly line.

This choreography is now complicated by technology suppliers — none based in Detroit and all new to the traditional automotive market. These players include Tesla, Waymo (formerly Google) and chip companies like Nvidia and Intel.

In an industry jumbled by newcomers, the partnerships among OEMs and tier ones are no longer business as usual. Existing alliances might be suddenly superseded by new ones. Competing technologies within rival autonomous vehicle platforms render the whole landscape alien and unpredictable.

The reporter’s life, of course, would be so much easier if the industry’s battle over automated vehicle platforms could be simply framed as a race between Nvidia vs. Intel. But nothing could be further from the truth.

On one hand, Nvidia wants the world to believe advancements in deep learning are swiftly and vastly transforming the automotive industry.

On the other hand, Texas Instruments, which has put more than 150 million of its ADAS and digital cockpit SoCs on the road, is confident that it can push its current [Level 1 2] platform to support Level 3 automated vehicles later this year. TI aims to take customers to the next level while protecting its software investment. TI also claims that a low-power embedded solution for running an AI-inference model is also in the offing.

The two companies represent polar opposite views and approaches, about how fast and how drastic the automotive industry is changing.
 
ADAS/Autonomous Vehicle (AV) platforms   
 “The auto industry has historically been a huge networked ecosystem with multiple tiers of suppliers,” Mike Demler, a senior analyst at the Linley Group, reminded us. “No one company can supply everything.”

Demler believes that at this stage, “most carmakers are still evaluating and developing. No one is looking to buy a complete stack.”

However, we can count now at least 10 ADAS/autonomous vehicle platforms — publicly touted and promoted by different parties.

Automated driving platforms we’ve seen so far include:

As shown in the table, not every AV platform can handle the gamut of ADAS and autonomous functions. Even Nvidia’s AV platform, focused on deep learning, can be described as a partial solution. It “will still need a safety monitor that can process control signals and monitor that,” noted Phil Magney, founder and principal advisor for Vision Systems Intelligence (VSI).

Egil Juliussen, director, research, infotainment ADAS at IHS Automotive, told EE Times, “I think there will be multiple software and hardware platforms that overlap, interact and compete with each other.”

Next page: AV Stacks

Article source: http://www.eetimes.com/author.asp?section_id=36&doc_id=1331791

Pioneer’s New Receivers Can Upgrade Any Car with Android Auto, Apple CarPlay

Pioneer has three new in-car receivers that can add Android Auto and Apple CarPlay to any car, even those with smaller in-dash compartments.

Pioneer’s new lineup of 2017 NEX receivers can now add Android Auto and Apple CarPlay to any car at about half the price from before.

Follow KTLA Tech Reporter Rich DeMuro on Facebook or Twitter for cool apps, tech tricks tips!

The company has three new receivers with model numbers AVH-3300NEX, AVH-2330NEX, AVH-2300NEX. Each one includes Apple CarPlay and Android Auto at a price between $400-$600.

It is also the first time Pioneer has made Android Auto and Apple CarPlay available in smaller size known in industry terms as single-DIN. They accomplished this with a retractable screen, which means you can now add the latest in smartphone connectivity to older cars, even classic rides.

We checked out the installation of the new receivers in several cars including a classic 1967 Datsun Roadster and a 1986 Camaro. Pioneer is embarking on a 50 city summer tour with the cars to let consumers plug in their own phone and experience the convenience of Android Auto and Apple CarPlay.

Both systems allow you to use your phone hands-free through a familiar interface on your dashboard screen. It’s one of my favorite in-car technologies and I highly recommend it. Not only do you get access to your maps, music, calls and texts, it is all done in a way that is way less distracting and dangerous than using your phone handheld in the car. In fact, your phone screen is disabled so you’re not tempted to sneak a peek at your notifications while you’re driving.

More information:

Pioneer AVH-3300NEX, AVH-2330NEX, AVH-2300NEX

Look for the Pioneer “Don’t break up with your car, Upgrade it!” Summer tour using the hashtag #UpgradeYourCar.

Article source: http://ktla.com/2017/05/26/pioneers-new-receivers-can-upgrade-any-car-with-android-auto-apple-carplay/

The Donald vs. Das Auto

When they want Donald Trump to grasp a topic, his advisers have learned to keep things simple. Visual aids help.

Unfortunately, global economic imbalances — the massive trade deficits of the U.S. and U.K. and surpluses of Germany and China — are complicated and intractable. No matter, Trump has found a simplistic way to frame the problem: Americans buy lots of German cars, whereas mean Germans don’t buy many from the U.S. Ergo, the overall U.S. trade deficit with Germany was about $65 billion last year. And deficits are bad.

Germany’s auto industry makes an odd target for several reasons, as I’ll explain below. Regardless, on Thursday Trump warmed to his theme: ‘“Look at the millions of cars that they sell in the U.S. Terrible. We’re going to stop that,” he said, according to German media. “The Germans are bad, very bad.”

Let’s leave aside basic economics for a second, which is pretty clear about the advantages for a country in specializing in an industry. If selling lots of cars is somehow a hallmark of low morals, the Germans are unquestionably evil. Last year German manufacturers sold 1.3 million cars in the U.S., whereas U.S. brands sold about half a million in Germany (the latter is of course a much smaller market).  

Trump’s Manichean view of global auto sales doesn’t withstand much further probing though. Nowadays, cars are often made where they’re sold. German carmakers have quadrupled yearly production in the U.S. to 850,000 units since 2009. About 40 percent are sold locally.

Similarly, many American vehicles sold in Germany are built there by Ford and General Motors Co’s Opel brand. So a more pertinent question might be to ask GM’s CEO Mary Barra why she’s having to retreat from Europe by selling Opel.

GM has suffered about $9 billion in losses in Europe in just seven years. So an American manufacturer has had unfettered access to Germany’s car market, and failed. As the German foreign minister says, U.S. carmakers should “build better cars”.

Trump’s own buying choices have reflected this reality. His timing is also odd. Volkswagen AG’s U.S. sales plummeted 8 percent last year after the dieselgate scandal. BMW AG is doing even worse. Its U.S. sales fell 10 percent last year, as consumers stopped buying sedans and started buying trucks and SUVs.

Plus BMW is a net exporter of cars from the U.S. If Trump were consistent, he would be a BMW fan. Mercedes and VW remain net importers to the U.S., according to Barclays, but both are investing heavily in American production.

Which brings me to my final point. You can’t have a big trade surplus unless you’re a net exporter of capital. Years of wage restraint, coupled with an aging society, have led to a huge surplus of German savings, some of which flow to the U.S.

Rather than targeting German autos with tariffs, Trump would have a far stronger case in urging the miserly Germans to cut taxes and boost investment. That might encourage more domestic purchases of U.S. goods.

There are limits, though. Even if you gave Germans a raise, it’s doubtful many would rush out to buy a Ford, Jeep or Buick. Like trade deficits, buying habits die hard.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. I included GM’s Opel in this rough calculation 

To contact the author of this story:
Chris Bryant in Berlin at cbryant32@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net

Article source: https://www.bloomberg.com/gadfly/articles/2017-05-26/trump-is-right-germany-s-carmakers-are-downright-evil

Upturn in the downturn: Auto sales predicted to edge up in May

U.S. auto sales in May will edge up 0.5 percent from a year earlier, despite consumer discounts remaining at record levels, industry consultants J.D. Power and LMC Automotive said on Thursday.

U.S. new vehicle sales in May will be about 1.54 million units, compared with 1.53 million units, a year earlier.

The forecast was based on the first 17 selling days of the month.

The seasonally adjusted annual rate for the month will be 16.9 million vehicles, down from 17.3 million last year.

The consultancies cut new vehicle sales forecast for 2017 to 17.2 million units from 17.5 million units.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But as the market has begun to saturate, automakers have been hiking incentives to entice consumers to buy.

Major automakers posted declines in U.S. new vehicle sales for April, an indication of the long boom cycle that lifted the American auto industry to record sales last year losing steam.

“While consumers will see substantial discounts this Memorial Day weekend, they are not expected to overcome the slowing demand in auto sales,” said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.

The consultancies said consumer discounts averaged $3,583 per unit, a record for the month, surpassing the previous high for the month of $3,342, set in May last year.

The average number of days a new vehicle sits on a dealer’s lot before being sold hit 71 in the first 14 days of May, the highest level for any month since July 2009.

Reporting by Arunima Banerjee

Related Video:

Article source: http://www.autoblog.com/2017/05/25/upturn-in-the-downturn-auto-sales-predicted-to-edge-up-in-may/

Advance Auto Parts: And the Bottom Falls Out

Shares of Advance Auto Parts (AAP) dropped 5.4% yesterday after releasing disappointing earnings, a miss that wasn’t exactly a surprise coming as they did after AutoZone’s (AZO) own disappointment. But for investors hoping that the auto-parts retailer will bounce back soon, they’ll have to contend with the fact that Advance just broke through a major bottom.

Check out this chart of Advance Auto Parts:

Advance has dropped below the level where it had found support during previous down drafts in the stock. Guggenheim’s Steven Forbes and team stay Neutral rated on Advance Auto Parts:

A Lot of Initiatives Equals Elevated Uncertainty—We Remain in Search of an Entry Point. Although management highlighted some early successes tied to its new customer-centric strategy and various productivity initiatives, including a) improving comps, b) professional customer contract wins, and c) the reduction of its fleet management partners, the sheer magnitude of the in-process initiatives, including the all-important supply chain optimization effort—the architect of which only joined AAP this month—amplifies the near-term operational and financial uncertainty surrounding the business. When combined with the likelihood of declining consensus expectations, we remain in search of a compelling entry point.

Shares of Advance Auto Parts have dropped 2.1% to $130.22 at 1:28 p.m. today, while AutoZone has gained 3% to $608.98.

Article source: http://www.barrons.com/articles/advance-auto-parts-and-the-bottom-falls-out-1495733587