ALLY FINANCIAL Just Put The ENTIRE Auto Industry On ALERT

so Ally Financial right now is warning of disaster that's in the car market now it's very important for us to pay attention to a company like Ali Financial because they do a lot of auto loans and as we know that if a consumer right now if they're going to buy a car they're not going to pay cash for it they're going to do it with credit this is how money moves in the car market so let's uh let's check this out um real quick so Ally Financial warns of intensifying credit challenges and they're shares slump so let's go over here and after they reported this their stock price crashed about 177% you've seen over the last five days they're down about 20% right now so the the consumer is in a is in a bad way right now and this is what uh this is what Ally is really really screaming right now is that their consumer which is going to lean more to subprime is is really having a tough go on it and they're saying that consumers have been cutting back on loans amid High interest rates with looming economic uncertainty also upping the chances of more loan defaults and what this means is really that consumers their savings rates are going down they're spending more on credit things are costing more and if they want to keep up with this lifestyle that they've been accustomed to over the the last three four years when money was rolling in well they're going to have to spend more because things cost more money and in those cases as their savings dwindles then what do they have to do well they don't have the cash to do it so they have to put it on their credit card and what the fear is right now is that people are starting to max out their credit and they still want to spend uh but they don't have the money to be able to do that so they can't make these uh these payments to keep their credit cards um current and uh things have to drop off and what Ally is worried about is that autol loone deling sees uh these repossessions are going to continue to climb and they're going to have to put more money back to cover that they're seeing that more of this is going to happen in the system I'm seeing it here at auctions right now too we seeing more repos come into the system the consumer is getting weaker all their savings is gone and now they're having to charge more this is a bad setup for the car market and obviously it's a very bad setup for for Ally so check this out right here Ally Financial craters after Auto Lenders reveal surging delinquencies charge offs and you can see right here this is a this is a line of of added credit spending over here to the right in last Harrah credit card debt unexpectedly Soares despite record high APS as savings rates hit record low this is just exactly what I was talking about all these consumers are savings rates they're getting depleted and they still want to spend money so they're tapping into all of this credit and what does this do this leads to a sudden collapse in US consumer purchasing power and this is going to really hurt both the lending space and the the retail space as far as uh auto loans and sales are concerned because if purchasing Powers goes out the window consumers can't get loans if they can't spend money then they're not going to be able to buy cars so this is very important for us to keep track on keep tabs on um because as the lenders go so should the car market because if people don't have the funds to be able to get the cars they're not going to be able to buy the cars putting more stress on a lot of these franchise dealers these automakers if franchise dealers can't sell the cars and they can't take allocations if they can't take allocations these autom manufacturers are going to have to shut down production we're already seeing this this is just a leading indicator when we see that the credit gets tighter when they see that uh delinquencies auto loans are going bad then this is going to funnel through the whole system because this is how cars move they move through debt so now in July and August delinquencies and net charge offs um the debts that are unlikely to be recovered charge offs these are already uh loans that the the Ally would be saying okay we're we're not getting this money back so so that's uh that's where your charge offs come from they Rose 20 and 10 basis points respectively in allies Retail Auto business compared to with his expectations so this is is not that they just Rose 10 to 20 basis points they rose that more than what the expectations were so Ally was already predicting we've seen this in the last few quarters that uh okay these charge offs were going to be bad these Auto delinquencies were going to be bad but it's even more than what they expected and this is a big reason why you're seeing okay uh their their stock price really sell off because they the way that they make money is by people paying money back and they making interest on that money but if a lot of these loans are going bad if a lot of these consumers can't pay for these loans then Ally ends up stomaching a lot of this uh these losses they're gonna have to take a lot of these cars back they go to the auction when these cars go to the auction they're bringing a fraction of what the loans were actually written for a lot of these uh these loans they're upside down we're going through the biggest negative equity crisis that the car market has ever seen and allly is going to take a blunt of the blunt of this because when the cars go to go to auction that average of like $6,500 uh that the consumer is underwater on their car well that's on the retail side so when that actually hits the wholesale side it's going to be much worse than that and here's the thing people who are getting their cars repossessed they're not taking care of them they're not able to make the payments anyway so guess what they're not able to get their oil changed they're not able to fix the dings the dents the the problems that rise in these cars maintenance issues sensors that go bad in these cars there's so many things that go bad in these cars and the worst that the cars are the less money they're going to bring at auctions when I myself are looking at cars that are repossessed I'm even going to pay less for a repossessed car than I am for a tradein because I know that car probably wasn't taken care of as much as some of these tradein so all these other dealers they know exactly what I know it's the same thing so they're not going to bring as much money and this is even more of a downside for Ally when they're having to take more of these delinquencies and turn them into repos and then try to scrape together whatever money they can get back been to auctions where I've seen Ally actually selling cars uh these these repossessed cars and the amount of vehicles that allies sending that Wells Fargo sending Capital One these big banks are sending to auction are continuing to rise every single day all right and here's a quote from from Ally themselves from the CFO um our borrower is struggling with high inflation and cost of living and now more recently a weakening employment picture now we're not thinking that okay unemployment's a big problem right now it seems like still a lot of companies out there hiring but it's interesting that uh that Ally would point this out so not only are their consumers which are more subprime leaning that they're dealing with inflation with everything just costing more um they're also dealing with uh okay their jobs so so this is just painting another picture not necessarily we talk about the car market a lot but really as the economy goes so should the car market so if employment side is weak that's less money for people to spend because they're making less money and then the cost of living is high that's two massive uh problems that the car Market's going to have to deal with because we need money flow we need credit flowing and that's how cars get moved so if the economy is not as good as what we're led to believe right now which is what Ally is saying um this this doesn't bode very well for a lot of these manufacturers that are trying to move product to dealers and a lot of these dealers they're trying to move product to Consumers and they also warn that they will see some underperformance given the number of struggling borrowers especially in the 61 plus day delinquency bucket uh that add that he expects reserves to move up so they're expecting to even have to increase uh their laan loss Provisions from here on out so they're saying they're saying that things are getting worse from here not better and uh they're saying that Del their their delinquency bucket that's 61 plus days that's that's where the problem is so people who are haven't paid uh their their bills for 61 for two months they're just they're not going to pay past this point there's going to be a rare situation where someone's able to get back on track if they've missed two months worth of payments and now and now they have to try to get that money from that consumer it's probably not going to happen those are the consumers that they're going to have to repossess those are going to be the charge offs that we were talking about earlier all right and here's a here's a comment I want to pull up and it says uh clearly the guide was disappointing and begs the question if this is a Ally specific or a can in the coal mine so what they're really talking about here is is this uh is this a Ally problem where okay they wrote loans that maybe they shouldn't have written or is this a car market problem because Alli does a lot of Auto lending or is this an overall economy problem in general and in my opinion looking at those charts from earlier that we were looking at with um okay your the savings rate at record lows we're see credit card spending going up and we're seeing that a lot of people are tapping um all the credit that they have and then they're even going delinquent on their credit cards now too not even just auto loans but also credit cards is this an economy problem or is this an ally problem and I in my opinion this is this is an economy problem we have all of this um this the spending that's been happening and people that have got accustomed to to Door dashing to uh to doing all this extra spending that they weren't doing before the pandemic happened and now we have to keep up with the Jones we have all these manufacturers that are that are uh raising their msrps constantly we have groceries we have insurance costs that are going through the roof everything costs more and wages have not been able to kep keep up and really wages can't because if you go through all these companies and then you increase all these workers pay then you create this massive wage price spiral and then things would get even more out of control so so there's a big problem with the economy right now and it seems like we're at a Breaking Point and we're seeing it now in the credit numbers and I don't believe it's just an ally problem I think it's an economy problem and I think unfortunately um the economy probably has to break for all of this to get fixed because prices at the end of the day just have to come down and the only way that they come down is for Ally to lose a lot of money for a lot of these companies to lose a lot of money and then consumers stop spending and that's when things like your car prices uh they they'll then come down because the manufacturers won't be able to get any more cars to these dealers we're already at the brink right now where these dealers are turning them down because uh the consumer is so weak unfortunately there's going to be a lot of hurt that's in this marker right now for things to to correct we're going through a correction right now where prices are coming down it's not enough though we need prices to come down by 20 30 40% um before things are fixed and people can actually afford things again the subprime borrower what uh Ally um really leans into those are the consumers that are getting hurt the most their wages have not increased like the upper middle class like the upper class where we're not seeing too much hurt on that side of the consumer but we're seeing it big time Big Time with these subprime borrowers that's where all the pain is coming from and that's really where a lot of the spending is going to come from too so those consumers unfortunately I believe they have to get hurt in this uh in this economy uh before things can really get fixed because then it's going to trickle into all these businesses where are spending their money and that's what we're seeing right now so for Ally for um all these auto manufacturers for a lot of these dealers I think it's going to continuously get worse um uh go of things for uh being able to actually move product to get people into loans it's going to be much more difficult auto loan delinquencies in my opinion are going to continue to rise we have the situation where over the last two years people paid way too much for their cars they got into loans that they couldn't afford and Banks just like Ally allowed it to happen dealers put add-ons they uh they packed a lot of these uh these payments full of stuff that people didn't need didn't want um fni products nitrogen dealer added markups everybody was getting a piece of the pie from these consumers and uh at the end of the day these consumers are suffering for it right now and because uh these consumers are suffering right now companies like Alli are also going to suffer and I believe it's going to get a lot worse through the rest of this year through the rest of next year um before it gets any better um so just for the car buying side if you uh if you need to buy a car I would ask you to be patient because I believe car prices this is going to affect car prices this 100% will affect car prices and car prices will be better six months from now than they are today they'll be better a year from now than they are today because the Situation's getting much much worse um but please uh subscribe to this channel like this video and I hope you have a great rest of your day