First off, the increase in prices wouldn’t be possible if it weren’t for the banks going along with it. Normally, there are limits in what banks are willing to lend compared to the vehicle’s market value. Because dealers have taken advantage of shortages in both the new and used markets, the “market” prices lead to lending of up to 140% over book values.
The result? People have car payments as high as $1,000 , pay cuts or lost jobs, and rising costs of living for people who kept a good job. Now, banks and repo men are turning to shady tactics to try to squeeze money back out of the vehicle’s former owners. Among several types of illegal repossessions , there’s a big problem with banks demanding fees be paid up before belongings left in the vehicle are returned to their owners.
It would be easy to dismiss all of this as irresponsible lending to subprime borrowers , but the spike in repos isn’t all happening to subprime paper. The rate of repossessions among people who had great credit scores also doubled in recent months. So, this is more of a systemic problem than one of lending to the wrong people.Obviously, this is a bubble in car prices driven by stimulus, shortages, and irresponsible dealers trying to cash in on it.