No help or wrong help for Detroit?

You flamed the original poster. The rest of us were having fun with
the thread. I must conclude that you were unfamiliar with the
original poster (familiarity would have made it unlikely you would
have flamed him) and, even if unfamiliar, weren't perceptive about the
post.

 

I was trying to be charitable.

FYI, Born in Philadelphia, lived near Denver for over two decades,
lived near Portland for a few years, and lived 45 minutes outside
Detroit for four years.

Could be the Dodge Spirit I lost in Detroit. I was driving along I-94,
hit a pothole and the entire car vanished into the road surface, just
like that. As far as I know, it's still there.

Fer sher.

 

They may not have the straight ahead traction on a $WD SUV, but I can
assure you from much experience on winter and rainy roads the Chrysler
Van isn't as likely to:
-swapping ends when braking,
-spinning out on slippery curves
-and flipping over on it's roof when sliding into the road shoulder

as many truck based SUVs often do.

 

Look, dude, I can read as well as the next person, so you can get off the
liberal band wagon of arguing by insults rather than facts. Ok? Yes,
assets secure loans, but banks are not going to use just any asset simply
because a company says they are worth something. Those assets wouldn't be
worth much at all if they were to be sold on the open market. My point was
that the bank really wouldn't want the assets in the first place. The fact
that the gov't was a co-signer made all the difference, period.

 

His assets were more liquid and thus easier to borrow against. Plus he has
guaranteed income from royalties that is the same as cash. But I don't
imagine you will admit to seeing that difference.

 

Spoken like a true liberal. Never let the facts get in the way of what you
think. And when anyone brings up the facts, all you can do is throw
personal insults, 'cause you have nothing else. Nothing.

 

Yep. That's what stocks are, too--cash loans from the buyers of the stocks.

 

You are right. In a NADA book on car values, for instance, there are three
values of any car. Wholesale (what a dealer might pay), Loan (what a bank
would probably loan you), and Retail (what you would expect to pay for the
car from a dealer. Buying from an individual tends to put you somewhere
between Loan Val. and Retail. But, again, you are correct in that loan
value is lower than average retail. The banks are going to protect their
butts, after all

 

Oh boy! It's been a long time since I was called a liberal. BTW, try
responding to posts in a timely manner.

Thanks for agreeing with me. Chrysler couldn't do it without the
taxpayers.

 

The chrysler fans are arguing that there was no risk for the taxpayers,
that chrysler had the assets to cover it. Obviously you now agree with me
that chrysler did not have the free and clear assets of enough value to do
so.

 

Like I said, usually people are calling me conservative these days given
the whole trendy bush-hating thing, this is rather refreshing. Who did I
personally insult? Nobody. Just calling the behavior what it is... a
stupid highschool style brand-loyalty arguement.

 

I don't know where you do your banking, but here in the states banks are not
in the habit of making car loans above the value of the car. It doesn't
matter how much money you have, because you could spend that all tomorrow.
It doesn't matter what your job is, because you could be fired tomorrow.
There are rare exceptions, I am sure, but I know I've never been able to get
a loan that was more than the loan value of a car. You can check a NADA
Book (National Automobile Dealers' Association) to get the loan value of any
car.

As far as getting insurance to pay your payments, these are usually offered
by the dealers and would come into play if you were disabled or killed. I
have a feeling that it wouldn't fly if you were to, say, just quit your job.
And, by the way, it is a significant increase in your car payment.

As for what the insurance company pays, yes, they will pay retail value,
i.e. what it would cost to replace the car because that was what you were
paying for as reflected by your insurance premiums. The bank, on the other
hand, if they were to repossess the car due to lack of payments, would not
give you anything. They would sell the car at auction for wholesale or
whatever they can get, and if there was a difference owed, you would be
liable for it. That's the law here in the US. You can't get away from
that.

Bottom line--you can borrow up to the loan value of the car. If you wish to
add more collateral, such as another car that is paid for, you can borrow
more, of course. They simply are not going to loan, as you stated, far more
than the car is worth at retail. That's just plain nuts. They'd be out of
business in a heartbeat if they operated like that. Business 101. I mean,
really, if what you were saying were true, I could look at a $25,000 Buick
and then go to the bank and borrow, oh, $40,000, right? After all, that's
"far more than retail, including taxes", right? And, of course, the banks
aren't going to mind being in the red, right? They are in the habit of just
trusting you to pay, right?

I would be very interested in the name of this particular bank you are
talking about as I want to call them immediately. Let's see if you actually
can name one. Just one.

 

What is happening is when a person buys a car and stretches the payments
over around seven years, ending up "upside down" in the loan, i.e. owing
more than the car is worth. This is the fault of the individual, not the
banks (the length of time to pay off is determined by the dealer and is
offered to buyers so that they may have a lower payment that they can
afford, albiet a much longer pay-off period), and this will bite the buyer
in the ass when he decides to sell it later down the road, unless he keeps
it long enough to actually pay it off.

You can buy a new car all day long with a seven year loan, but to do so will
put you in this bad position. If you can't afford to pay the car off at or
more than the rate of depreciation, then you can't afford the car.

 

Go away, brent. John Delorean, indeed. He was convicted of selling
cocaine, but you are, again, selective in what you want to bring to the
discussion table.

Wolfpuppy has no more time for you.

 

Chrysler's situation

1) It had debt that was so large it was unable to make the payments.

2) It needed money for daily operations and product development.

3) Operating out of bankruptcy protection was unlikely to be a viable
option of a company producing durable consumer goods. (Yes, airlines
do it, but there's a big difference between having spent $150 on an
airline ticket that will be used in a month and spending $8000 on a
car that is expected to be used several years and is expected to have
significant value at the end of that time. I don't fly on bankrupt
airlines, but it appears my view in that case is a minority.)

4) The only solution was debt forgiveness combined with new loans.


The Banks' view

1) The best loss is fhe first loss.

2) Liquidation takes time.

3) By granting debt forgiveness and making new cash advances, which
was the only solution for Chrysler, the banks would have a lower claim
on assets in the event of eventual failure and the time at which they
could make a recovery would be greatly extended.

4) So overall the banks made their problems worse by debt forgiveness
and new loans.


The government's carrot

1) No risk for the banks on new loans.

2) The banks got immediate payment in the event of failure instead of
having to wait years for liquidation.


The governments cost

1) Supposedly administration, but they charged Chrysler for that.

2) In the event of failure, the government had to handle the
liquidation and wait for their money.


The result

Chrysler expected to make a lot of money on the Ks. They did less
well than expected because gas prices stabilized.

Chrysler expected to make a lot of money on the Imperial. It didn't
because that was too expensive a car for a company in trouble.

Chrysler expected to make a lot of money on the more expensive K
derivatives. To a degree it did, but due to stabilization of gas
prices, did a lot better with the obsolete rear drive Fifth Avenue
than with the modern rear drive New Yorker (typically the Fifth Avenue
sold about 50% more units).

The minivan turned out to be a huge success.


Other possible results

Chrysler might not have made it through 1980, because it had a
marginal model lineup. At that point, a merger with Ford would have
been ideal. Chrysler had the Ks and minivans in the pipeline, while
Ford was behind in developing similar vehicles.

Had gas prices gone down significantly in 81-82, the Ks might not been
sufficient to pull the company out. Chrysler bet everything on high
gas prices. But the minivan still would have sold well, there was
still a need for cars like the K, and a merger with Ford still would
have been possible with a high likelyhood of success.

Old Henry couldn't have let personal views stand in the way of a
merger. He was between a rock and a hard place, as a Chrysler merger
with anyone else would have really squeezed him.

 

Hasn't worked that way in decades.

Banks aren't trying cover themselves from a worst possible outcome
(borrower defaults) when the probability of that is low (a person with
sufficient income to pay the loan and a reasonable payment history).
Some lenders aren't even doing it when the income is sufficient and
the borrower is flakey, figuring the borrower will eventually pay and
the lender will get to collect hefty late fees.


See this

http://www.capitalone.com/autoloans/index.php?linkid=WWW_0206_AUTO_03_HOME_C1_01_T_AC1

From section "dealer purchase used:

"For a used vehicle purchase from a dealer, you may include any tax,
title, license, registration or lien filing fees, any credit insurance
or extended warranty/service contracts, or any other costs or fees
normally associated with the purchase of a vehicle from a dealer.

"Your actual loan amount will be equal to the total sales price of
your vehicle purchase minus the value of any trade-in and/or down
payment you choose to make."


From section "person to person used"

"You determine the loan amount you need since our credit decisions are
based on you and not the vehicle"

Furhtermore, lenders have to loan money to make money. If they're not
lending as much as they need to, they relax credit requirements.

Then there's the manufacturers lenders. In the late 80s Ford was
marginal on meeting CAFE. The solution? Let the dealers know that
Ford Motor Credit would finance flakey borrowers if they'd buy a stick
shift Tempo or Escort.

NADA and the others might as well leave out the loan value column.
Its meaningless and a waste of ink.

 

Yes, instead of helping his car company, the government decided to use
the desperate situation to entrap him. And as I recall, that defense was
successful.

Good. You don't seem to understand how to reply timely or not at all.

 

I never knew George Bush was a liberal!

 

Not exactly so. Only the purchaser of the original issue of a stock
pays his money to the company. Anyone there after is paying the
previous stock holder.