The New Subprime market : Ford Financing

You think the higher risk borrower will have the emergency fund to cover the out of warranty expenses?

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Hey I remember this in 2007. I guess the bankers don’t, oh wait, tax payers bailed them out. How much money did Ford get again? They pretended they didn’t use tarp but they got a sweetheart loan for 6 bill. Had things gotten worse then that loan would have been forgiven.


I thought (i could be wrong) but didnt ford refuse it or was the only one who paid back early with interest?

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Corrected. Just another way around it. I think they did it that way to keep their f150 sales up bc so many of those buyers were opposed to tarp.

Regardless no requirements for loans just shows how lackadaisical these conapnies are to true economics.


They don’t care whether you drive the vehicle or park an overweight paperweight on your driveway.

Keep making payments or they’ll send the repo guy.


I wonder what actually prompted the move. It is not like they are sitting on a huge surplus of cars they need to move. What I think is happening is that they are looking into raising MSRPs - and anticipate that they might need to extend credit to people who were not eligible before to get sales.

Just speculating, of course.

Alternatively, the demand is so strong that they don’t really care if borrower is likely to default or not - they will always be able to turn the car around and recuperate.

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I used to do this all the time

Restructure loans by extending terms, raising the APR and lowering the payment — with a fee upfront.

Obviously for large businesses but the idea is the same.

Monthly nut gets lowered helping cashflow

People going for 84 months might not care about the high apr or payment waterfalls

The sidelining of Fico is intresting - there’s probably some other mechanism in place.

I still think they’ll pull fico’s but still provide financing at a high APR

Fortress has some of the baddest lending agreements lol — picks, prepayment penalties……

an EXPENSIVE overweight paperweight LOL

yeah probably the idea.

However, i think as the interest rate rise along with the selling prices, it will result in higher defaults.

But on the opposite side, they wont be selling that many cars

The reason Ford was able to get around it was because it had raised capital before the liquidity crisis.

What happened with auto manufacturers is something I never imagined the US government would do. It was outright theft and a disregard for bankruptcy law. They squeezed the debt holder who have priority in the cap structure to help others out. It was beyond bad and violated so much. People who purchased the debt specifically because there was downside protection were completely screwed.

Car manufacturers weren’t just crushed by low credit borrowers.


My understanding is that GM and Chrysler received TARP funds, but Ford did not. Ford, however, received other types of financial assistance from the federal government.

TARP as a whole ended up making a profit, with profits from companies in the financial sector (banks, insurance companies, etc) papering over losses from the the automotive sector.

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Most lending decisions aren’t purely FICO-based. There is an enormous difference between removing the minimum FICO score requirement and not having credit requirements.

For decades, American Express has used a proprietary profitability model to determine who gets approved for a card and how much they can spend with it, and FICO is only one input. They’ll decline someone with a 740 and approve someone with a 650.

The reverse is also true. You can have a FICO that meets mortgage lending requirements, but a BK or spotty employment history will cause a decline.

There is nothing novel about what Ford is doing here, and it doesn’t mean that the credit quality of their loans is going down (or if it is, that they haven’t priced this fact into their finance rates).


Not speaking to whether auto bailout was the right move but as a general discussion point (which is only tangentially related to your post) saying the feds had the option to spend X billion dollars or spend nothing is not correct. The federal government was already on the hook for most of the unemployment costs if Chrysler and GM had failed. And probably the much bigger liability would have been the PBGC assuming payment near half a million pension obligations for decades - likely requiring a separate bail out of that government agency. Also, the failure of the retiree health plan would have imposed significant costs on Medicare. And these are all direct costs, not considering a potential knock on effect on related industry or whether Michigan would have been able to stay fiscally solvent.

Which is all to say, in the end bailing out the automakers was definitely cheaper for the feds than letting them go bankrupt. Whether it was the right move is a different question.

Also, Ford didn’t go bankrupt but, as you allude to, they did take some of the $25 billion in government backed loans in late 2008. So there continued solvency isn’t unrelated to the first round of stimulus spending at the end of the Bush administration.


I’d love to see a list of politicians and other insiders that bought Ford stock at $1.30-$2 back then for a quick 10 bagger. I’m sure you could easily see insider trading on all the companies that got bailout funds.

Of course the taxpayer got an absolutely abysmal return on investment for tarp. 3.5% over 6 years? Hahaha. Why didn’t they hold that stock? What would the roi be today on all those companies. Prob close to 300-500%

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Cars only appreciate in value

What’s the problem with an 84-month subprime loan on a 60K truck sold above MSRP with a 3/36 warranty… It will be worh 100K in five years!

They should be offering 360 month loans… :rofl:

Seeing how there is no punishment for insider trading especially for politicians, is it even considered illegal at this point? Whatever happened to all those senators and congressmen that did a ton of trading right after the covid briefing? I don’t remember reading anything about prison sentences or financial penalties, only “yeah they did it, and yeah there is proof, and no nothing is being done, suck it!”

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F-150 lightning will be able to power a house, so technically it’s a whole house generator and as part of the house can be considered for HELOC or mortgage. So 30 year car loan here we go!


You mean USA is run by a buncha mobsters and grifters, like every other country? Whoddathunkit!

Yes, but there used to be some finesse to politics, now it’s literally “yeah I did, dafaq you gonna do about it? Nothing that’s what! Sit your bitch ass down and we’ll continue the way it was always done”


When George Soros attacked the Hong Kong dollars the Hong Kong government responded by buying shares of private companies and eventually made a lot of money, my brother got one year property tax waived as a result because the government eventually gave back the gains to the people. The move was criticized by Alan Greenspan and others because of government interference of free market, I guess we (the US) don’t really walk the talk lol.

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