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Concerns about subprime lending sure sound familiar, HBO’s John Oliver says.
Comedian John Oliver devoted nearly 18 minutes of his weekly HBO show “Last Week Tonight” on Aug. 14 to subprime auto lending, which he said closely resembles the buildup to the subprime mortgage crisis that led to the Great Recession.
“There is concern that this could be the subprime mortgage crisis, but with cars,” Oliver said. “Normally, if you add the phrase “but with cars’ to any historical event, it sounds a lot more fun — like, “the assassination of Abraham Lincoln, but with cars.’ Sadly, this is the exception to that rule.”
Before blasting large lenders such as GM Financial and Santander for increasingly turning to subprime auto financing, he examined and critiqued “buy-here, pay-here” used-car lots that offer financing on used vehicles to buyers with poor credit.
The result, Oliver said, is disastrous for low-income car buyers. He pointed to a woman who was locked into a contract to pay $13,000 over the life of her loan for a car that was worth just $3,000.
“The only way it’s acceptable to sell someone a $3,000 car for $13,000 is if you slip a mint-condition X-Men Issue 1 into the glove compartment,” he said. “At that point, you’re being generous.”
Oliver conceded that since auto loans make up a smaller portion of the U.S. economy than housing loans, an event on the scale of the 2007-08 mortgage crisis is unlikely.
Many industry experts agree. Matt Carroll, senior director of financial services at Standard & Poor’s, said in March that the industry is “coming off the best part of the cycle,” so a rise in subprime lending and delinquencies is normal.
In April, subprime origination volume increased 0.1 percent to $9.5 billion, but the share of subprime origination balance declined. Subprime made up 18.4 percent of the market, compared with 19.3 percent a year earlier, according to Equifax.
Subprime loans become prime target for Oliver
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