Automakers & Car Dealers Are Going BANKRUPT As Prices Skyrocket and Customers STOP BUYING | Episode 922

And this is Karin Bly for Thursday, September 11th with your hosts, me, Ray, and well, my handsome son,

here, Zach. And, well, today's not the day necessarily to be loud, as I normally am. Today is a day,

I think, to remember. Yeah. It was 24 years ago today that I remember we were living in Arizona

at the time. And she... Am I not on? I don't think you're on. Now you're on.

Okay. Well, as I was saying, today's not a day to be loud. Today's a day to remember. And it was

24 years ago today. I remember I was at home getting ready to go to work, and mom had the

Today Show on. And then we saw the first tower go down. And I was thinking to myself,

oh, my God, what the hell is going on in this world today? And it was one of the scariest,

eeriest days that I can remember in my life as to just how quiet life became. We lived,

I want to say, about two miles from the Scottsdale Airport. And there was always some noise.

There was no noise. And I remember late that night that I heard aircraft overhead,

and it was like, what's going on? It was just, I don't know, one of the worst days

of my life that I can ever remember. Yeah, I remember going to school that day.

I went to work. So it was 2001, so I'm 25, I'm 30. So I was five years old.

Something like that. Six years old. I was six years old. I remember going to school that day.

Vividly. And I remember us getting taken out of school. We were in Arizona.

So it happened later in the day. Yeah, super, super sad. Ever since then,

though, I've taken a real interest in documentaries on what happened that day.

The plane where the passengers, and I'm sure on all of the planes that were impacted,

the passengers were fighting back, trying to do their best to try and, I don't know,

protect themselves, defend themselves from what became such a terrible tragedy.

That plane that was intended for the, where was it going? Was it going back to the DC area

that ended up crashing in Pennsylvania? Yes. I remember watching some documentary on that and

just thinking to myself, holy, holy cow. Yeah, I would imagine efforts of those people.

I think that one was meant for the White House. But yeah, it's a day that,

it's a solemn day and it's a day that we as a nation should never forget and as a people never

forget. And maybe by remembering what occurred that day, we can come to the conclusion that,

you know what, we're all Americans and that means something. Yeah, man.

Okay. Well, for anyone that was impacted beyond the fact that we were all impacted,

our thoughts with you are with you. And yeah, super sad day, a day to remember.

Friendly reminder, caredge.com. If we can help you out with anything, check it out,

back at caredge.com, buy a car without the headache, all that fun stuff. Dad, I wanted to

talk today about bankruptcies because we have not only seen over the past. I saw that. Yeah.

You knew it in there. We now have not only seen the fact that automakers have gone bankrupt.

For example, Lordstown filed for bankruptcy back in 2023. Earlier this year, Nikola,

another EV automaker, filed for bankruptcy. And it was last year in 2024 that Fisker,

yet another EV automaker, filed for bankruptcy. We now have, and we talked about it a bit earlier

this week, a used car dealership group, Tri-Color filing for bankruptcy as well. And it's not

the first time we've seen dealer groups file for bankruptcy. So we have all sorts of

financial issues happening in the auto industry, automakers, car dealers. And at the same exact time,

we have the latest and greatest data on car prices. Excuse me. Dad's trying to close a door.

Yeah, it's kind of loud here at the WeWork. We have the latest and greatest data on car prices.

And what do we see here, Dad? New vehicle prices rise as 2026 models hit dealer lots.

So that's what I wanted to focus today's conversation on is bankruptcies in the

auto industry. Bankruptcies with car dealers in car prices, we're going to review the data,

continuing to go up. So what's the point? Those who have can do, and those who don't can't,

and those who really have it bad and go to subprime use car dealers,

even they can't get help at those dealerships because those dealerships are going bankrupt.

Yeah, it's probably not a good time to have bad credit would be, I think, the way to say it.

And it's probably not a good time not to have a high paying job. Because if you don't,

it's becoming increasingly more difficult to afford just about anything. I told you the

story last week when I ordered fresh coffee and the coffee had gone up 20% in a year.

Mine is not Brazilian coffee, it's from Honduras. And it still went up. Well,

Brazil has a huge tariff. But a 20% increase in coffee prices.

Yeah, but some of this isn't tariff related at least. I mean, Dad, look back at some of these.

I'm not saying it all is. I'm just saying. Well, then why are we talking about coffee?

Because I'm just trying to say that if you don't have a high paying job today,

it's harder than ever to try and make ends meet because so many things are so much more

expensive than they had. Just the cost of living, of being able to afford the essentials,

is harder today than it was two or three years ago. So I guess when you tie all that together,

it's not hard to realize why we're seeing such struggles with like Tri-Color and the other used

car dealers that had gone out of business and the amount of repossessions that we're seeing

from not only subprime borrowers, but regular prime borrowers.

Yeah, but I think it's also important that it's not just dealerships. I cued up three

different automakers who over the past three years have also gone bankrupt. And you and I have

covered on this show a lot the fact that there are many manufacturers who may also be on the

precipice of bankruptcy. Nissan's one that comes to mind. Initially, at least there's

been rumors that they only have a year's worth of cash and they've made a lot of decisions.

I get that there's an angle here of costs going up, which I think is important. That was why I cued

up the fact that we had the latest data on 2026 model year vehicles increasing average new car

prices. But it's also that strategic shift that many automakers took to go towards electric vehicles

that doesn't seem to be panning out right now. Like look at Nissan, they have the Aria that

thing is not selling. There's a reason they have 0% financing on it plus cash incentives.

And so it's a little bit of a slippery slope, I think, for automakers because customers

have stopped buying these very expensive vehicles, at least some of them. That's why Nicola went out of

business. That's why Lordstown went out of business. That's why Fisker went out of business.

No one was paying those jacked up prices. And it could be more automakers on the horizon

that deal with that as well. That's why VinFast is having a problem. And that's why

there's any number of manufacturers that are having problems. And many of the legacy

manufacturers that tried so hard to make their EVC mainstream are pivoting and going back towards

internal combustion engines, looking at hybrid technologies and delaying full battery electric

vehicles for the foreseeable future. Because realistically, this isn't something that just

started happening this year. The lack of acceptance for EVs in this country, even though

EV sales are better than they've ever been. Last month, they were the best they've ever

been in history. But that's the pull forward effect of everybody who's interested in an EV

trying to take advantage of the $7,500 federal tax credit before it goes away.

Yeah. If you take that out of the equation, the EV growth that was anticipated, at the rate it was

the anticipated to happen, never happened. And that has caused issues for many of the

manufacturers out there. And in particular, it's hurt me, Son. When you look at the

the route that Toyota took, they seem to have fared the best because they weren't just willing to

dive head first into full battery electric vehicles. They were really into hybrids long

before hybrids became popular. Yeah, absolutely. Now, we've got to take a moment to thank the

sponsor of today's program, our friends over at DeleteMe. Then I want to continue the

conversation because that's the automaker piece. Yes. And it does tie into prices

going up. But then there's also what happened at Tricolor, which I think is interesting as well.

Now, there's a major issue out there right now that data brokers are selling our information

online and anyone can buy it. Things like your social security number, phone number,

and home address are sold online every single day. You hear that, Pops?

Even with my hearing aids, even without them, I could hurt that one.

They're available to marketers, scammers, and everyone in between, damn it.

There it is. Yeah.

Now, DeleteMe, the sponsor of today's program, helps you take control over your data.

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So one more note on the automaker piece. Yes.

And then I want to talk about tri-color. 49,077 bucks.

Yes. So we've seen the average transaction price for new cars go up from $48,841 a month

before to $49,077, and the actual percentage of incentives has gone from 7.3% to 7.2%.

So manufacturers are spending less money on incentives to sell cars,

yet they are increasing the prices of those vehicles.

That is a recipe for disaster if customers stop buying at elevated price points, which

we've already seen with some of the more niche automakers thus far, Fisker,

Nicola, Lordstown. But we very well may see for some of the mainstream automakers in the

not too distant future. That being said, a brand like Nissan, they're running out major incentives

right now like crazy in an attempt to offset this and try and make sure that they don't end

up in bankruptcy court. It's a slippery slope. We know that for 2026, there are going to be price

increases. And in many cases, they're going to be relatively modest price increases because

whatever increase costs the manufacturers incurred, they have chosen at this point

to eat as much of them as they possibly can. I mean, look at Toyota, they came out and said that

on average, their prices are only going to go up a couple hundred bucks. Yes. Not that big of a deal

relative to what we've seen some of the other automakers do like Audi, a 15% price hike on the

Q5, for example. And relative to the fact that Toyota expects extra costs of $10 billion

this year due to tariffs. So that gives you some ideas to how much profit they had built

into all these vehicles in the first place, which was, I guess, one of the reasons why they

could operate at a 10% that profit margin, which is now probably today somewhere around 5%

for most of these manufacturers. Having said that, it just seems to me that there's enough

of that small percentage of people who have been buying cars and will continue to buy cars

whether there's greater incentives or not. That 13% to 15% of the population that feels

comfortable enough to spend the money it takes to buy new cars, if there's a 3.5% or 4% or 5%

price increase, that would not be enough to dissuade them. Those who have already been dissuaded,

the 85 to 87% of the population that's out there that says, how I can barely afford a used car,

let alone even think about a new car. If prices go up 3 to 5% and incentives stay where they're at,

even if interest rates come down, there is nothing in that mixture that would be

compelling to those people who already feel as if they can't participate. There's nothing that

suddenly says to them, I think I can do it now. Now, Dad, let's talk about Tri-Color.

Tri-Color was a large independent used car dealership group. What that means is they

had multiple locations and they sold used cars. Think of them as not too dissimilar

from CarMax or Yarvana. They're just a really large, the seventh largest used car dealer

in the United States. I'm going to read this. Okay.

Tri-Color didn't give a reason for its bankruptcy filing. The companies focus on loans to undocumented

immigrants through scrutiny this year, with some investors concerned the business model came with

heightened risk amid President Donald Trump's immigration crackdown. According to the company's

website, prospective borrowers can apply for financing with Tri-Color without a social

security number or credit history. Tri-Color made more than $1 billion worth of auto

loans last year. According to a report from Kroll Bond Rating Agency in March, JPMorgan Chase Company

and Fifth Corp, Fifth Third Bank Corp and Barclays are among banks bracing for potentially hundreds

of millions of dollars in combined losses from loans tied to Tri-Color. Bloomberg reported citing

people familiar with knowledge of the matter. Let this sink in for a second, folks.

We have been on this channel many times talking about a Carvana, for example,

where you, it's in their disclosures, to get a proof for an auto loan need to be able to demonstrate

that you make more than $100 a week. No, no, a little less than $100.

A little less than $100 a week. $5,000 a year. You need to have an income of $5,000 a year.

To get a proof for an auto loan at Carvans. Yes.

You read this. Yes. Obviously, it's different. It says nothing about how much income you

have to prove, but it explicitly says you do not need a social security number or credit

history to get a proof for an auto loan. Tell me we're not just in a fantasy land, folks,

because that's what it sounds like when you read something like that. And then they go under,

and then these banks that underwrote the loans, that actually underwrote the loans, JPM,

Fifth Third and Barclays, are now going to be holding the bank for hundreds of millions of dollars.

Well, maybe it wasn't fantasy land a year ago, two years ago.

It's fantasy land today. It's a fantasy land today. It is hard for your

customers to make their payments if they've been deported. I'm just saying.

Okay. I should not laugh, but that's actually very true. Yes.

And kind of a crazy sentence to say. It is not a sentence I ever thought

in my lifetime that I would say, but think about that. If there has been this huge

immigration crackdown. Yeah. Okay. And apparently there has been. I mean,

you read about it every day. Yeah. So if you're taking these people who are,

in some cases, probably undocumented in the Kurds, if they don't have a social security number.

Yeah. And if you were the business that preyed upon those people to

write auto loans and now they're deported from the country, what incentive do they have

to make good on their own? Yeah. I'm pretty sure they could care less about any deficiency

balances. Wherever these folks have ended up, they're not concerned about a deficiency balance.

They're not concerned about the car that got left behind. But those who were in charge of

tricolor made a bet that they could sell vehicles to this type of client base without

social security numbers, without credit histories, and that those people would somehow figure out

how to make those payments. And my guess is that for quite some time they did until they

weren't here anymore. And then they stopped. And so I guess it was foolish to think that

that was a strong market. It might be. It might be a word with an F. That might be fraud.

I think there's a little bit of that that's bubbling up in this. You can see it here,

Fifth Third, said in a regulatory filing on September 9th, which was two days ago,

that it faced an impairment charge of up to $200 million, saying it discovered fraudulent

activity at a commercial borrower, which it didn't identify. I think we're starting

to pie together here. People with knowledge of the Mattertale Bloomberg, the client,

was tricolor and that JP Morgan and Barclays were also expecting to write down loans tied

to the company. So this might actually end up being fraudulent as well. And I think it's worth

calling it. It's so hard to imagine when you're talking about lending money to people that don't

have social security numbers or credit history. And I think that brings up a little bit of what

I wanted to comment on here, which is we see these bankruptcies happening. Bankruptcies.

Thank you. Happening. And we also see auto loan delinquency rates through the roof.

A lot of this is just trying to keep the merry-go-round going around in circles.

Keep the game going. Keep the game going. Keep the game going. Keep the game going.

And you see moments like this. Someone forgot to pay the electricity, though the merry-go-round

stops running. And what happens? Ultimately, you identify fraud. Ultimately, you identify,

and yeah, I'm thinking about, it's not fraud, what's happening over at Lucid, but

they're paying their CEO billions of dollars or whatever it is, and they lose billions.

There's a lot of things that are happening in the auto industry right now that aren't

healthy, that aren't sustainable. And we're starting to get some significant

cracks like this in that foundation. Well, and if there are other used car

dealership groups out there that specialized in the same client-based that Tri-Color did,

that would mean that there's many more additional loans out there that are going to be an issue.

Independent used car dealerships can be notoriously shady.

Be careful what you say. We have a friend that has used car business, and he is not

that branded, and he's not. I'm not talking in blanket, but I think in general.

Yeah. So, I mean, it is well known that there are shenanigans. Let's put it that there are

shenanigans in the auto industry. Also, for what's worth, we don't have this platform to

defend Brandon. He has his own channel. He's done a great job.

He could defend himself. Yeah, he could defend himself. I'm not here.

That guy's got five different YouTube channels. He pulls back the curtain on all of them. Brandon,

with car questions answered, does a great job. And it doesn't change the fact that used car

dealerships and mom and pop used car dealerships, independent used car dealerships, notoriously

faced this even bigger sleazeball persona than a franchise new car dealership.

Typically, yes. But my point was going to be that if there are other dealer groups out there,

maybe not as large as Tri-Color was, but catering to the same clientele and client base, then

perhaps this becomes a much bigger issue for many of the banks. Now, what I recall about 2008-2009

during the Great Recession was that when banks put themselves in a bad position,

it was the taxpayers of this country that bailed them out. Because, well,

some of these banks were just too big to fail. So, the question becomes, are we going to repeat

history? Is there going to be a need to bail these banks out again? And after we bail them out,

write new rules and regulations in regards to banking and how they're allowed to make loans,

and what kind of loans they're allowed to make, and then take all that off and say,

go ahead, make all the loans you want to make. And we're right back in the same situation.

One of the things that came out of Dodd-Frank, which was after the global financial crisis,

was that these financial businesses have to write off loan loss provisions.

So, they set aside money in advance of these loans, whether it be auto loans, which,

to be clear, auto loans make up a very small portion of the overall debt structure in the United

States, the credit system in the United States. It's a lot of student loan debt. It's a lot of

mortgage debt. Yes. Auto loans are up there for sure, but it's not the biggest category.

And we see now that every quarter increases, for the most part, in loan loss provisions.

I want to talk more broadly, though, about what's going on for credit in the United States

for auto loans. And you can see here, this is the latest data from Cox Automotive.

The approval rate for auto loans rose by 100 basis points, so 1% in August. A new high for the year

and a sign that lenders are still approving more loans overall. However, this was offset by tightening

in other areas. So, the first line here is the approval rate for auto loans actually went up

in the most recent month of August that we have. The share of subprime loans stayed the same.

Okay. So, we did not see an expansion in those that are getting subprime approvals.

Okay. So, the increase in loan approvals was for those who had better credit.

It seems that way. You should be able, I guess, I'm trying to extrapolate that.

You can see here, loan term length, the share of loans with a term greater than 72 months actually

decreased to 25.4%, reflecting a shift toward shorter term financing and more conservative

approach by lenders. And you can see negative equity actually went down just a tiny bit,

a positive sign for borrower health. So, more approvals, shorter terms.

Yes. That's kind of good news, maybe.

Well, it is. And what it says to me is it's more approvals and shorter term loans for people

who have better financial health than others and who might better understand the impact that credit

would have on A, a loan approval, and B, on the payments for that loan approval.

So, all I see there is that the banks are kind of holding steady on subprime lenders

are not going crazy at the moment. And they're willing to lend money to those who have shown

a propensity to pay it back in a timely manner in the past.

It is interesting because we anticipate that fund rate will go down.

Yes. So, we're very curious to see as interest rates drop down for car loans,

what happens to approval rates, what happens to loan term length, things like that.

For what it's worth, for those of you that are contemplating buying a car anytime soon,

our expectation, my expectation at least is you're going to see more of those 0%

financing offers from manufacturers who are desperate to move the metal.

We obviously keep track of all that. Yes.

Back on the Carriage website. From Rich. Thank you, Rich.

Pops won't like this. Yeah.

Two tight both ways. The Lamborghini Rivalto Phantom Shadow 25.

Okay. Let me do this. Lamborghini.

I guess we're going to look up the Lamborghini Rivalto Shadow.

Anthem Shadow. One second. Y'all, let me let's get the screen share going.

All right, Rich. What do you got us doing here? Images.

Okay. Oh, wow. What the heck is this?

I believe in my case that would be called a coffin because once I would get in it,

there would be no way to get me out of it.

You think you're stuck in that thing?

No, I think so for eternity. Yeah. Yeah. It is a somewhat unique looking automobile.

It looks wild. It does. It really has that race car look and feel to it.

Yeah. All right. Well, thanks for getting us to look at this. I don't think it's for us.

Yeah. My guess is perhaps it comes in a stick and maybe we could teach you how to drive a

car. I don't think that comes in a stick. Let's fold this from Facebook from Tias.

The car market is going to crash just like the housing market did in 2008.

I see signs for that, but we've been talking about for years. I don't know if I believe

myself anymore because we've been saying for years that the car market's going to reset.

And I guess in some areas it has. Look at Nissan, it's resetting over there.

They're having a lower prices. They're having an incentivize. But then you look at Toyota,

it's like, what crashed? Toyota is never crashing.

I believe the car market has adjusted and the car market, as we know it,

is now meant for 13% to 15% of the population. And then the rest are screwed. You will drive some

type of used car or you will ride around in a Lyft or an Uber or a Waymo or a Robo Taxi or

whatever, but there will be no need for you to own a car because, well, you couldn't afford

them. So I don't think there's going to be a crash. I think the reset has been,

the manufacturers have established in their minds who it is that can actually afford to buy

their product. And those are the only people they care about at the moment.

And those will probably be the only people they care about moving forward for the foreseeable

future, in my opinion. That could be wrong. Normally I am.

So it's not a crash. It's an evolution of the car market. It should only be for those that

can afford it. You've heard me say it before. The chasm between those that have and those

who don't has never been wider. And I think as the car market resets, that is a perfect

illustration of it. The manufacturers are good with selling around 16 million new vehicles in

the United States to the 13 to 15% of the population that can actually afford to participate.

They're good with that. They don't need to have that number necessarily go up to 17 million

or 18 million annually. They can get by very, very comfortably, most of these manufacturers,

at that 16 million number, 15 to 16 million new vehicles a year, that generates enough

profit for them. That's fine. And they're okay with the other 85% of the population

wanting to be able to buy a car. And getting a used one. And not being able to. They are okay

with that. So I think it truly is more of a reset than a crash. That being said, if you are in the

market or if you're thinking about buying a car anytime soon or even just want to track the

value of your vehicle, you got to check out caredge.com. We've been working on it almost

six years now. So please, please, please, folks, take a second and go on the Google

machine or go directly to caredge.com from Matthew. Thank you, Matthew. Say it with us.

That's how you pronounce. Then we're getting revuelto.

Revuelto.

It's the revuelto. It's the Italian car. It's the revuelto.

It certainly seems that way.

It seems like something. It's like pasta.

There it is. Your new.

It's the fettuccine of points cars.

All right. Let's call it a show, pops. We're back tomorrow before caredge live. So tune in

then. We'll have something to talk about. They will do phone calls tomorrow. We can do some

phone calls from the community since we're sitting side by side here. I think that'd be

kind of fun.

Yeah. If you can figure how to make that work, I'm in. Yeah, absolutely.

Cool. All right, folks. We'll enjoy your Thursday afternoon again.

Solemn day. So just keep that in mind. I'm going to keep it in mind as we

progress through the day. It's also just eerie being here in D.C. on a day like

today. It's a little extra eerie. But yes, thank you to everyone who protects this country.

Keeps us safe. I love you, dad. Thank you everyone for tuning in today.

Love you too. See you all tomorrow. Thank you, everybody.

Automakers & Car Dealers Are Going BANKRUPT As Prices Skyrocket and Customers STOP BUYING | Episode 922

Rolls-Royce Phantom

Lamborghini Rivalto

Revuelto

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