Only 29% of U.S. Households have auto loans.....

VanHalen

......and the average loan(s) amount to over $27k for that 29%.

Some interesting statistics from The Motley Fool. ## fool.com/retirement/general

PeacePeople

My belief is that's a little misleading. There are plenty of people that take out equity loans to finance vehicles, so while the debt is assigned as mortgage, it's not used for the actual property.

BAJJERFAN

@PeacePeople said:
My belief is that's a little misleading. There are plenty of people that take out equity loans to finance vehicles, so while the debt is assigned as mortgage, it's not used for the actual property.

Smart borrowers since banks don't ask you to justify how you used the loan money.

ShadyDave

If you look at more car loan stats, it is unbelievable that people are getting loans for 6+ years on assets that depreciate very quickly and only last 10-12 years. Nearly 20% of new (loans) on used cars are for 6-7 YEARS:

http://www.marketwatch.com/story/auto-loan-amounts-length-hit-record-in-2016-experian-says-2017-03-02

Bochiman

Still driving my 2001 4runner that I paid off <6months after purchasing.
Do have a small auto loan, ,$15k, on my wife's 2014 vehicle (we like to keep our vehicles for awhile) since the rate was so low....lower than home equity would have been even with potential tax deductions.

I have a friend in finance that told me last month to expect to see some sort of collapse/issue with auto loans that was coming soon. It won't affect me, or my loan, since they can't change the terms and it is through my CU (and since I could pay it off whenever I wanted, IF I wanted), so not sure of all the implications.....maybe some cheap new autos on the horizon for potential buyers.

derryb

New car bubble is about to pop. Lots of subprime auto debt out there.

Kkathyl

I took out a auto loan one time never again. Now I just put away money in a account while running a paid for car till it dies, then I buy the next car. It also makes you really, really, want the car before you fork out the cash.

BAJJERFAN

@ShadyDave said:
If you look at more car loan stats, it is unbelievable that people are getting loans for 6+ years on assets that depreciate very quickly and only last 10-12 years. Nearly 20% of new (loans) on used cars are for 6-7 YEARS:

http://www.marketwatch.com/story/auto-loan-amounts-length-hit-record-in-2016-experian-says-2017-03-02

Only way that they can make the vehicle/s affordable.

derryb

Surging Fraud In Auto Loans Looking Eerily Reminiscent Of Mortgage Bubble

VanHalen

@PeacePeople said:
My belief is that's a little misleading. There are plenty of people that take out equity loans to finance vehicles, so while the debt is assigned as mortgage, it's not used for the actual property.

That is a good point and was part of what happened in the run up to the 2006-2007 housing bubble. I was surprised by the 29% figure when you consider 85 million new vehicles (light vehicles) have been sold in the U.S. in the last 5 years.

I realize many were sold to businesses and some were cash purchases but 50+ million had to be financed consumer purchases. I guess if you figure 50M vehicles/130M households = 39% and count multiple loans in one household then 29% does make sense.

On another note the Motley Fool link also reveals 31% of U.S. households holding essentially zero debt. That's a pretty strong number. I wonder how many of those 31% hold business loans?

derryb

Leasing is a big part of the equation. While not a loan, it is still a monthly payment.

VanHalen

@derryb said:
Leasing is a big part of the equation. While not a loan, it is still a monthly payment.

That is true as well.

Automotive Lease Volume Reaches Record High in 2016, According to New Edmunds Report
_Nearly one-third of all millennials who purchased a new vehicle in 2016 chose to lease

Edmunds
26 Jan, 2017, 13:38 ET

SANTA MONICA, Calif., Jan. 26, 2017 /PRNewswire/ -- Automotive lease volume reached an all-time record level in 2016 of 4.3 million vehicles, according to the latest Lease Market Report from Edmunds, the leading car shopping and information platform. _

bronco2078

I swear as someone who works on cars , I have this feeling that there is another auto bubble no one is talking about. The cars of today are so needlessly complex and packed with so many idiotic options that at some point they are just going to stop running and not restart. In some ways the idiotic idea of leasing cars is peoples response to the fear they have of gargantuan repair bills. I've heard many people say that is why they lease or buy new cars regularly .

In the 60's american cars would often come with no warranty or a 12 month limited warranty because they were somewhat unreliable . They required yearly service or they would stop running, however , as warranty lengths crept up to higher numbers (mostly with the move to solid state electronic ignitions from points) and mechanic hourly rates shot up the end of the warranty started to become an expiration date . People don't want to own these things after the end of warranty and they are willing to flush 1000's of dollars down the toilet to avoid that.

On the other hand strangely enough , on a base mechanical level some brands can manage to run 300,000 miles now . I drive a Ford work truck I bought brand new in 1989 with now almost 400,000 miles on the manual transmission without any rebuilds. If it had one of the overdrive automatics they started using at that time it would have failed long ago and while I can fix a transmission myself from that era most owners would have bought a new truck instead of paying that $3000 bill .

Cars tech peaked 10 or 15 years ago , everything since then has been pointless rube goldberg keep up with the Jones's foolishness. If you bought a toyota camry in 1995 for instance you could still be driving it every day , the same for a Volvo of the 90's and there are many others. The lack of satellite radio , backup cameras , heated seats and all the other nonsense that's standard now would not keep you from making it to work every day.

DrBuster

My 99 wrangler has been paid of since I can't remember, had it 17 years. Wife's 06 vue, title in hand for 7yrs. I financed my hemi after the Silverado blew up the last time and I was sick of working on that POS. With what they gave me for the chevy, and the end of the year 10g off, I got that thing for half price new. No rush in paying a $270 note but I have been sending extra and owe a whopping 2k on it and it will be paid off probably by August although technically my next payment isn't due until May '18. Was going to pay it off this winter but we blew some coin going to Costa Rica instead, zing.

Having grown up in an auto sales/industry family I wonder if that 29% counts any of the buy here/pay here notes that the used lots do. The reporting with that side of the industry is grey at best.

And bronco - I work on my jeep, have only had to call mercy and take it to the shop 2x. My brother has a new fancy one (carpet, windows...all that luxury stuff)...couldn't even imagine working on that.

cohodk

Yeah, they don't make cars like they used to. My 5500 pound diesel pickup gets 27mpg in everyday driving. One time I had to drive 728 miles before the light came on. Took 25 gallons. The horror of driving 10 hours without a pee break. Brutal.

Baley

Drove my 2000 4 runner ( metallic silver in color, there, now we're on topic ) from San Diego to Mt. Hood and back again last month, runs like a champ, 1000 miles each way. Paid cash in 2005 and never looked back. Wifey drives 2016 MDX, frankly I like her old SUV better. But I'm old school like most of you. I'm pushing 50 and the Toyota is only my 5th car.

bigjpst

I think Bronco hit it on the head. I was a mechanic for 20+ years and cars now are basically designed to throw away every few years. Nobody wants to be holding the bag when that $5000 transmission goes out.
I have heard financial advisors recommending no longer purchasing new cars but just leasing. Not just because of the costs but because the way technology is changing so fast that cars just a few years from now will be so different you may not want to be tied to ownership.

ctf_error_coins

@Bochiman said:
Still driving my 2001 4runner

So am I, I have a great mechanic that keeps fixing it every time I break it, desert gold mining is hard on a 26 year old vehicle ....

ricko

I have a 2004 Jeep Wrangler... paid off in 2006... Have only replaced tires and battery. Do regular maintenance, but no major issues...There are many more years in that Jeep... Cheers, RickO

BAJJERFAN

Usually the worst thing about an American vehicle is that an American owned it.

Musky1011

Debt Free and Loving It, including our home
Baby step seven here

cohodk

Did you know that in 1986 there 16 million vehicles sold in the USA? The population then was 240 million. Today the population is 324 million. Hmmm, 16 million sold today doesn't quite seem like a bubble now, does it?

cohodk

Only 5 cars Baley?

1974 Amc Ambassador. 30,000 miles driven
1979 Chevy Nova. 35,000 miles.
1989 Pontiac Leman's 101,000 miles.
1992 Jeep Cherokee 93,000 miles.
1996 Mercedes C280 127,000 miles.
1998 Jeep G. Cherokee 105,000 miles.
2001 Dodge Caravan 134,000 miles.
2010 Jeep G. Cherokee 72,000 miles.
2012 Chevy 3500. 84,000 miles.
2011 Ram 3500. 165,000 miles.
2015 Ram 1500. 37,000 miles.
Various rentals. 20,000 miles.

Dang near a million miles driven in 32 years. This is an amazingly beautiful county we have here. I encourage everyone to get out and see it all. It can add some perspective to one's views.

Baley

Yes, 1982 Camaro, 1986 300ZX, 1990 Hardbody, 1999 Maxima, and the 4Runner, along with dozens of rentals for business and pleasure.

Motorcycles included 1982 Nighthawk 750cc and 1989 Ninja ZX10 1000cc, and a few dirtbikes and motorscooters.

Bochiman

I'm still wondering what this will actually mean?
Will it be more likely that dealerships have financial issues?
That manufacturers will start having financial issues (Ford/Toyota/etc)?
That cars are likely to go down in price (against wishes of the manufacturers and dealers)?

Seriously, a lot of talk about what people have, but I'm trying to figure out repercussions as it may impact me (investment or personal if I am looking to buy a new vehicle)

cohodk

Bochiman...

Average age of a car is over 11 years. The sales rate now is far from being excessive given historical trends. There will always be marginal buyers of vehicles. Interest rates are extremely low, hence many finance rather than pay cash. The death of the auto industry is grossly exaggerated---yet again.

carew4me

lot of bitching about cars of today while people lovingly list post 2000 models as beloved road warriors (?)

post 2000 cars regularly get 150,000+ with basic maintenance and tech is improving.

VanHalen

@cohodk said:
Did you know that in 1986 there 16 million vehicles sold in the USA? The population then was 240 million. Today the population is 324 million. Hmmm, 16 million sold today doesn't quite seem like a bubble now, does it?

Huge quality difference though. In 1986 the average new car was good for 80,000 to 90,000 and then was spent. Today it's double that and the number of licensed drivers hasn't grown with the population either.

The domestic auto industry knows they are in trouble in the long run. Autonomous cars, electric cars and overseas cost advantages will all but bury the U.S. automobile industry over the next 20 years. That's one of the reasons their stock prices are so low.

Walkerguy21D

**cars now are basically designed to throw away every few years. **
Hmm, thrown away by whom, and why?
Overall the quality and durability is way up on many models. We always buy vehicles that are 2-3 years old, with low miles, extended warranties, and 'factory certification', at a fraction of the OSP - let someone else eat up that big chunk of depreciation. And we pay cash....except our oldest daughter, who could have, but wanted to establish 'credit'.

cohodk

@VanHalen said:

@cohodk said:
Did you know that in 1986 there 16 million vehicles sold in the USA? The population then was 240 million. Today the population is 324 million. Hmmm, 16 million sold today doesn't quite seem like a bubble now, does it?

Huge quality difference though. In 1986 the average new car was good for 80,000 to 90,000 and then was spent. Today it's double that and the number of licensed drivers hasn't grown with the population either.

The domestic auto industry knows they are in trouble in the long run. Autonomous cars, electric cars and overseas cost advantages will all but bury the U.S. automobile industry over the next 20 years. That's one of the reasons their stock prices are so low.

Sometimes you guys make this too easy...

In 1986 there were 159 million licensed drivers. In 2016, about 215 million, an I crease of about 35%. Population grown was also about 35%, therefore your claim of growth is false.

Regarding electric cars and autonomous cars....who the hell is going to build them, the tooth fairy? Regarding cost advantage...I would have you research wage growth in other countries vs the US. You will see the gap in wages narrowing which will force more production back to the States.

Yes, quality is much better and cars last longer which actually reduces the cost of a car over time.

From 2000 to 2008 there was an average of over 16 million cars sold. Those cars are now between an 9 and 17 years old and will all need to be replaced. We've only been at a 16 million car rate for about the last 2 years which means we've got another 6 years just to replace those.

There is absolutely no new car bubble.

Baley

Yeah, I tend to pay cash and keep stuff a while

In 30+ years, I'm still on same original bought mountain bike, scuba gear, windsurfer, water skis, snow suit, pistols, hunting knives, etc. Some stuff wears out, been thru a dozen volleyballs and pairs of flip flops, trunks, Hawaiian shirts etc but only by necessity. I blew out a pair of snow ski boots in Breckenridge and had to replace them and picked up skis too, but generally a big fan of buy well and run into the ground..

Baley

In same 30 years, only had 4 jobs

bronco2078

@cohodk said:
Only 5 cars Baley?

1974 Amc Ambassador. 30,000 miles driven
1979 Chevy Nova. 35,000 miles.
1989 Pontiac Leman's 101,000 miles.
1992 Jeep Cherokee 93,000 miles.
1996 Mercedes C280 127,000 miles.
1998 Jeep G. Cherokee 105,000 miles.
2001 Dodge Caravan 134,000 miles.
2010 Jeep G. Cherokee 72,000 miles.
2012 Chevy 3500. 84,000 miles.
2011 Ram 3500. 165,000 miles.
2015 Ram 1500. 37,000 miles.
Various rentals. 20,000 miles.

Dang near a million miles driven in 32 years. This is an amazingly beautiful county we have here. I encourage everyone to get out and see it all. It can add some perspective to one's views.

I had to google to see what an AMC ambassador was . I briefly owned a dark green AMC Javelin . I customized it by putting a rambler scrambled eggs decal on it

BAJJERFAN

@Walkerguy21D said:
**cars now are basically designed to throw away every few years. **
Hmm, thrown away by whom, and why?
Overall the quality and durability is way up on many models. We always buy vehicles that are 2-3 years old, with low miles, extended warranties, and 'factory certification', at a fraction of the OSP - let someone else eat up that big chunk of depreciation. And we pay cash....except our oldest daughter, who could have, but wanted to establish 'credit'.

Well my mechanic referred to my 2004 Chevy Cavalier as a throw away car. It runs great, has very few issues except for routine maintenance and gets pretty good mileage.. AND IT'S PAID FOR!
A throw it away car is one whose book value is low enough that it doesn't make financial sense to spend several thousand for repairs. And was likely a lower cost vehicle the day it rolled off of the assembly line. The Ford Focus is likely another.

Walkerguy21D

No problem with a nearly 14 year old Chevy being considered a throw away car....I do take issue with someone stating, and I'm paraphrasing, that today's new cars are only good for a few years, and that they are designed to be thrown away after that. If anyone wants to throw away their V6 Camry, Honda CRV, Toyota Sienna, or Infinity G37 that's a few years old, please PM me!

BAJJERFAN

@Walkerguy21D said:
No problem with a nearly 14 year old Chevy being considered a throw away car....I do take issue with someone stating, and I'm paraphrasing, that today's new cars are only good for a few years, and that they are designed to be thrown away after that. If anyone wants to throw away their V6 Camry, Honda CRV, Toyota Sienna, or Infinity G37 that's a few years old, please PM me!

Pretty sure throw away refers mostly to Murican cars.

VanHalen

@cohodk said:

@VanHalen said:

@cohodk said:
Did you know that in 1986 there 16 million vehicles sold in the USA? The population then was 240 million. Today the population is 324 million. Hmmm, 16 million sold today doesn't quite seem like a bubble now, does it?

Huge quality difference though. In 1986 the average new car was good for 80,000 to 90,000 and then was spent. Today it's double that and the number of licensed drivers hasn't grown with the population either.

The domestic auto industry knows they are in trouble in the long run. Autonomous cars, electric cars and overseas cost advantages will all but bury the U.S. automobile industry over the next 20 years. That's one of the reasons their stock prices are so low.

Sometimes you guys make this too easy...

In 1986 there were 159 million licensed drivers. In 2016, about 215 million, an I crease of about 35%. Population grown was also about 35%, therefore your claim of growth is false.

Regarding electric cars and autonomous cars....who the hell is going to build them, the tooth fairy? Regarding cost advantage...I would have you research wage growth in other countries vs the US. You will see the gap in wages narrowing which will force more production back to the States.

Yes, quality is much better and cars last longer which actually reduces the cost of a car over time.

From 2000 to 2008 there was an average of over 16 million cars sold. Those cars are now between an 9 and 17 years old and will all need to be replaced. We've only been at a 16 million car rate for about the last 2 years which means we've got another 6 years just to replace those.

There is absolutely no new car bubble.

Bob Lutz and repeated stated the auto industry has a very difficult future in the long run. The guy has been an expert on the U.S. auto industry for over half a century. There's a ton of articles on how and why this will happen by Lutz and others. Trucks getting 14mpg and generating $20k/unit for Detroit will last as long as cheap fuel and cheap money keep flowing.

We're surrounded by bubbles thanks to The Fed and D.C. and the U.S. citizen demanding they have it all and have it all right now. The auto industry is but one example. The strength of the USD will allow us to continue accumulating trillions more in debt to prop up the carnival and keep the bubbles flowing, for a while anyway.

bigjpst

@Walkerguy21D said:
No problem with a nearly 14 year old Chevy being considered a throw away car....I do take issue with someone stating, and I'm paraphrasing, that today's new cars are only good for a few years, and that they are designed to be thrown away after that. If anyone wants to throw away their V6 Camry, Honda CRV, Toyota Sienna, or Infinity G37 that's a few years old, please PM me!

>
Sorry let me clarify. Maybe exchange is better than throw away. They exchange it at the dealer, the dealer fixes it up and sells it to another with an extended warranty usually for a few grand to cover the likely event the new buyer will have to use it. The extended warranty on new cars is a huge money maker for dealerships BTW.

The extreme costs of major repairs makes people more likely to buy a new car than do the the repairs on newer vehicles than on vehicles past. A transmission on some of the cars members have stated owning for decades may run in the $1000-$2500 range. My 1997 ford truck was $1800 my 2000 chevy runs a bit higher. Now the transmission on my 2013 Nissan is closer to $5000. And both Nissan and Honda have known trans issues. You can pay a couple grand for the extended warranty but I didn't. I don't buy insurance in Black Jack either.
You can call it anecdotal or take offense, but when I started in the industry 25 years ago people used to get those major repairs done, engines, transmission etc., because they could afford them. Over the last part of my career just a few years ago we saw less and less people willing to spend the money to fix the big problems and they would just buy a new car. And not everyone does the regular maintenance As hard as that is to believe.

BAJJERFAN

@bigjpst said:

@Walkerguy21D said:
No problem with a nearly 14 year old Chevy being considered a throw away car....I do take issue with someone stating, and I'm paraphrasing, that today's new cars are only good for a few years, and that they are designed to be thrown away after that. If anyone wants to throw away their V6 Camry, Honda CRV, Toyota Sienna, or Infinity G37 that's a few years old, please PM me!

>
Sorry let me clarify. Maybe exchange is better than throw away. They exchange it at the dealer, the dealer fixes it up and sells it to another with an extended warranty usually for a few grand to cover the likely event the new buyer will have to use it. The extended warranty on new cars is a huge money maker for dealerships BTW.

The extreme costs of major repairs makes people more likely to buy a new car than do the the repairs on newer vehicles than on vehicles past. A transmission on some of the cars members have stated owning for decades may run in the $1000-$2500 range. My 1997 ford truck was $1800 my 2000 chevy runs a bit higher. Now the transmission on my 2013 Nissan is closer to $5000. And both Nissan and Honda have known trans issues. You can pay a couple grand for the extended warranty but I didn't. I don't buy insurance in Black Jack either.
You can call it anecdotal or take offense, but when I started in the industry 25 years ago people used to get those major repairs done, engines, transmission etc., because they could afford them. Over the last part of my career just a few years ago we saw less and less people willing to spend the money to fix the big problems and they would just buy a new car. And not everyone does the regular maintenance As hard as that is to believe.

Of course during the recession of a few years ago people were putting off repairs unless it was absolutely essential.

rawteam1

People buy insurance here, and they call it gold, doesn't make much sense... but that's why the house offers it on blackjack, the house knows all and the house always wins...

Walkerguy21D

Ah, Ok, thanks for the clarification - I can agree with the exchange mentality.....two and three year leases seem to be extremely popular.....and I wouldn't be surprised if 'repair avoidance' is one consideration.
I shop hard and do my homework, and only get the extended warranty if it fits into the overall out the door price that I'm willing to pay, and both times it has paid for itself.

cohodk

@bronco2078 said:

I had to google to see what an AMC ambassador was . I briefly owned a dark green AMC Javelin . I customized it by putting a rambler scrambled eggs decal on it

yeah, it was a true American classic. Lol. Did have V8 360 though and i once put 2 deer in the trunk. It got 12 MPG. Haha

cohodk

So VanHalen, are you saying Ford and GM will go bankrupt or that America will stop producing cars? And how about the millions of cars manufactured here by foreign manufacturers?

I contend, and back it up with historical vehicle sales and demographic data, that the number of vehicles sold in the US will average over 16 million units for many years, and disagree with the notion that there is a bubble.

What exactly is the bubble you see? As long as a car is needed to get from point A to point B, people WILL buy cars.

It sounds like you are complaining that F and GM make too much money and that you can no longer fix your own car. But that has nothing to do with demand for, or the long term existence of automobile manufacturing in the US.

jdimmick

I have car loans, I could actually probably buy one outright, but why, the loan percentage is so low its cheap money.

I believe its like 1 3/4 % last car before that I had, they wanted to sell it so bad, they gave me an extra 1000 bucks off the car price to finance it at 2.9%

VanHalen

What bubble do I see? What bubble don't I see? Student loans, auto loans (subprime), equity markets, bonds, real estate (again), public pensions, and even some commodities are still in a bubble. We're slaves to debt, greed and power and not in that order. More and more money is being concentrated in the hands of a few, 2/3 of America is broke and a crisis is waiting in the wings. Our answer will be to print more USD and add a few trillion more USD to the supply to keep the bubbles propped.

The Fed has a dual mandate: 1. Create bubbles, 2. Inflate bubbles. Keep their masters in the money regardless of the consequences. But actions have consequences and they can ZIRP and print for only so long.

cohodk

And I think we've just seen why it's
impossible to have rational and logical discussions on this forum.

If there is just one notion that I hope I've brought to this forum it's that the emotional will always be consumed by the intelligent. If the emotional would just put their collective brains together they could overcome and force the change they seek. Until then, they will merely be pawns and food for those who choose not to feel sorry for themselves.

BAJJERFAN

@cohodk said:

@bronco2078 said:

I had to google to see what an AMC ambassador was . I briefly owned a dark green AMC Javelin . I customized it by putting a rambler scrambled eggs decal on it

yeah, it was a true American classic. Lol. Did have V8 360 though and i once put 2 deer in the trunk. It got 12 MPG. Haha

They also had the Matador and the Gremlin.

BAJJERFAN

@jdimmick said:
I have car loans, I could actually probably buy one outright, but why, the loan percentage is so low its cheap money.

I believe its like 1 3/4 % last car before that I had, they wanted to sell it so bad, they gave me an extra 1000 bucks off the car price to finance it at 2.9%

Nothing worse than after a year, your pride and joy is just a car but you're still paying on the thing every month for years afterwards.

metalmeister

Bronco pretty much nailed it. Being a auto mechanic is more complex than being a doctor. Humans haven't changed in 100,000' of years. Cars on the other hand. Don't get me started. Sealed transmissions, needless features which distract the driver, too much @##% which adds $$$$$.
5 cars here. One with no computer ( 1967 Cougar 390GT) which I will be driving around after the mega x-flare takes down most of the computers in cars on the road.hehe

ShadyDave

@VanHalen said:
What bubble do I see? What bubble don't I see? Student loans, auto loans (subprime), equity markets, bonds, real estate (again), public pensions, and even some commodities are still in a bubble.

I agree with all of those except student loans. Since student loans can never be discharged, (unless you're disabled, dead or get a federal job) I don't think it is a bubble. While it is crippling debt for the millions of uninformed youth, the gov't and other lenders will get their money at some point.

Baley

@metalmeister

Humans haven't changed in 100,000' of years.

Sure they have. A lot.