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Used Car Prices are  Crashing, Meaning Big Trouble Ahead for Car Companies and Other Auto  Lenders

Used Car Prices are  Crashing, Meaning Big Trouble Ahead for Car Companies
and other Auto  Lenders.  As the chart below shows, economic dislocation caused by the corona virus
has triggered the biggest decline in car prices since the 2008 great
recession, And some analyst say the declines this time could be far worse as
a result of years of subprime lending practices by major car  companies and
other auto financiers, Why? They ignored the risks inherent in loose lending
practices to spur sales. Now, the chickens are coming home to roost.  JP
Morgan Chase says the finance arms of Ford and General Motors are facing
multi-billions in losses.  Trouble also  is on the horizon for major auto
lenders such as Ally financial Inc, Santander Consumer and Credit
Acceptance. They, like the car makers, are reportedly experiencing
fast-growing delinquency rates. And  that likely will spur repossessions
that will flood the car market along with streams of cars that are coming
off cheap long-term leases. Obviously, the more used cars that flood the
market, the greater the decline in prices.  Which means bigger and bigger
losses for lenders who will be unable to sell the cars for the value of
their outstanding loans and leases.

Used Car Prices are  Crashing, Meaning Big Trouble Ahead for Car Companies and other Auto  Lenders
Used Car Prices are  Crashing, Meaning Big Trouble Ahead for Car Companies
and other Auto  Lenders

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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