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Post by tomas on Jan 17, 2018 10:31:40 GMT
I wonder about car loans if LTV corresponds to the right risk exposure as car depreciation could decrease the value of a car faster than LTV. There is some sense for real estate as it normally increase in value in the long run.
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Post by buttchopf23 on Jan 17, 2018 21:31:51 GMT
Sorry tomas I don't understand your question at all. Can you give an example? |
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Post by itemor on Jan 18, 2018 5:21:17 GMT
Car lose value over time. Example today 30k car most likely cost a lot less after 3-4 years, i would say 20k. And in 7-10 years ~5-10k ( random numbers).
Same time real estate value usually goes up overtime
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Post by amoult on Jan 18, 2018 7:17:08 GMT
I wonder about car loans if LTV corresponds to the right risk exposure as car depreciation could decrease the value of a car faster than LTV. There is some sense for real estate as it normally increase in value in the long run. Depreciation is not taken into account. This is clearly stated on Mintos site: "LTV is calculated using current outstanding loan balance against collateral value as of a moment when the loan was issued." So theoretically collateral value could be less than outstanding balance a few years down the road. ..Or on the road in this case  On home loans it's not guaranteed either that real estate values always keep rising. There are many examples in different countries where housing bubbles have burst and remaining loan balance has been bigger than the current value of the property. Of course these usually happens hand in hand with massive unemployment rise as well. Still, LTV value on Mogo loans is an excellent tool when comparing two loans having similar interest and duration
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p2pmaster
investment is life.
Posts: 128 
Likes: 54
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Post by p2pmaster on Jan 18, 2018 14:44:09 GMT
Car lose value over time. Example today 30k car most likely cost a lot less after 3-4 years, i would say 20k. And in 7-10 years ~5-10k ( random numbers). Same time real estate value usually goes up overtime The more gadgets and "upgrades" car have, the larger the depreciation. For new cars, the depreciation schedule looks like this: - D0 / out of dealer: -10% of car value - Y1-Y3: -10/12% each year - Y4-Y5: -6/8% each year Hence, after 5 years the car will lose 50/65% of its value. After Y5, depreciation slows considerably until it becomes negligible, usually at the 10-year mark. After that, the condition and desirability of the model will be the main determinants of its worth.
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kulerucket
Member of DD Central
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Post by kulerucket on Jan 18, 2018 22:14:47 GMT
I wonder about car loans if LTV corresponds to the right risk exposure as car depreciation could decrease the value of a car faster than LTV. There is some sense for real estate as it normally increase in value in the long run. I asked a similar question when I started out about a year ago. My opinion now is that for longer term loans that are paying very little principal back, the devaluation is much higher. For shorter term loans it's not so bad. For Mogo loans, I essentially ignore the LTV because I am lending against the strength of the Mogo buyback. Which IMO is one of the strongest on the platform.
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fric
Member of DD Central
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Post by fric on Jan 19, 2018 8:54:38 GMT
Well, depreciation is not taken into account, that's true, but look at Mogo's average client, he isn't buying a slightly used car, he is buying 10+ years old car, which unless it totally breaks down, doesn't have that much depreciation. But ofc shorter term loans for cars imho is a better option. 5-6 years is a long term - the person could crash the car, it could suffer serious problems (e.g. engine failure, broken transmission for automatic etc etc) and than you end up with no collateral in the end.
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Rob
Posts: 138
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Post by Rob on Jan 26, 2018 10:13:06 GMT
I agree that depreciation could mean the LTV going up over time, even though principal payments are being made. But with a Buyback guarantee, I don't think the investor need worry. Mogo is one of the better loan originators on Mintos.
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