Busnies as Usual

I have just come across a concept that seems to have been hidden in plain sight. It is called "snowballing". Any process that accretes some quality or quantity to a base is like rolling a ball of snow across other snow to make the ball bigger.

That concept has come to be applied to consumer spending. It is noticeable in mortgage lending, consumer debt and automobile financing rollovers. At first it may have been a convenience to a person who was in a period of reduced income but had positive prospects for being able to realize greater income later. It is now applied with abandon and is business as usual for here-to-fore lending institutions that required the application of savings or reserves from the borrower to pay down so me debt or to forgo more debt.

With automobile debt, there seems to be a significant bubble of debt that is being accreted whenever the value of a used vehicle does not support a reasonable total payoff from one vehicle to another. The remnant debt is rolled into the new financing for the new vehicle. It is called being upside down in a contract.

I have now seen two news stories that describe such situations in auto loans. The resulting situation for the subjects in the story is that the debt has become unmanageable and the resulting penalties are predatory as regards the lending institution.

I am now shopping for a replacement vehicle. I have an SUV that is now 8 years old and it is in need of major repairs. Fortunately it is paid off. The repairs, however, are such that the cost of such exceeds the value of the vehicle even repaired. The materials and parts are available from suppliers but the labor to install them and to make to the adjustments for their operation is now off the page. This is as a result of the accretion of taxes, fees and insurance that municipalities have slipped into business liscening. The business owner must recover those expenses from his customers. The result is that the life of a once repairable product is reduced because the cost exceeds the value.

I shopped at a dealership that posts all its cars with a "no haggle" price. It is not until one enters the office of the business closer that the true price of the vehicle is known. I have walked out of two closing offices on this go 'round. At one time the dealer prep, tax, license and tranfer fees were listed on the vehicle. They now come in the closing documents. This is where the haggling begins. Once the financing closer gets through, the bargain or reasonably priced vehicle becomes a "snowball". I have found that the old simple interest contract of just 8 years ago has now become a complicated scheme of acccretion that makes the difference between owning a vehicle and being owned by it. the addons and the interest can reach 30% over the life of the financing. I ended a lease on another vehicle a couple of years ago. The contract had been loaded and the close out of the vehicle caused me to return the vehicle and to withhold the end of contract cost that had been creatively worked in to a snowball. I let that go to small claims and when my copy of the contract did not match the hidden contract of the financing agent, the claims were thrown out.


"To live outside the law, you must be honest."
Bob Dylan
Absolutely Sweet Marie

The snowball of real estate took its pounding. There is some talk among analyst that the complications of auto financing now festering will break out soon.

Anything that does not contribute to an orderly society will sooner or later find itself in reproach.

Please, be attentive, be intelligent, be reasonable, be responsible.

You have no business to believe me.

I ask you to believe nothing that you cannot verify for yourself. . .

If you have not a critical mind, your visit here is useless.

G.I. Gurdjieff