The Loan Outlives the Tow

Word arrived that the lenders had worries too. Ambrose: near 6% of subprime car loans in bond pools run 60 days late, by one rating agency's measure. Pim: a long holiday! Mrs. Applewhite, with a collections trade paper's example: $9,000 owed on a ten-year-old car worth $2,500. The Toll Keeper: taken back and sold, the lender clears about $1,300 and is $7,700 short. Prudence: the loan outlives the car, and the tow.

By Fitch's measure about 6% of subprime car loans in bond pools are at least 60 days late, near historically high levels, and a collections trade paper's worked example shows why an old car is poor security: on a ten-year-old car with $9,000 still owed and worth $2,500, the lender would net about $1,300 after costs and be left about $7,700 short, so a borrower may stop paying because the car, not the payment, became unaffordable.

Starring

🎙️The NarratorAmbrosePimMrs. ApplewhiteThe Toll KeeperPrudence