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Strategies & Market Trends : Value Investing
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To: Jurgis Bekepuris who wrote (27717)8/10/2007 4:28:20 PM
From: a128  Read Replies (1) of 78717
 
I looked at CRMT after it was mentioned here some time ago and/or I saw some insider buying.

Im not confident that their model is sustainable. I believe their reserve for losses is too small and their customer is EXACTLY the kind of folks that have subprime mortgages...or worse. Probably worse.

The buy here pay here car business does not work well as a chain. It needs the HANDS ON of an owner or family. Otherwise, too many people have a vested interest in getting people into cars without regard to their ability to pay for it.
Also, corporate car buyers are often "on the take". The car auctions often have $100 or $200 CASH sales whereas whenever you buy one of their cars, they hand the buyer cash.

That just means they overpaid for the car and the buyer stole money from the company but its a regular occurance on the auction scene.

A long time ago, it was tried on a grand scale.... called Urcarco. They failed bigtime and later morphed itself into Americredit. And, suprisingly, it didnt do too bad.

Apparently, they used their data from all their losses in the buy here pay here car business to construct a good model and then got into loaning only...to subprime borrowers.

Did pretty well once they got the heck out of the car business and strickly into the paper business.

Its at a 2 year low by the way.
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