'01 Pontiac Grand Am made it to 201K when I sold it and an '06 Pontiac Vibe was donated at 211K.
As long as we have cheap gas, no one cares about fuel economy and that is one of the reasons trucks are still very popular. Small dip in April truck sales; will be interesting what happens in May. F and GM are talking a good game but Wall Street hasn't been paying attention. I personally think F will be a single-digit stock before November and GM will have a 2-handle (again) in the same time frame.
The last several vehicles have been 3-year leases, usually obtained at the 'end-of-the-model year' blowouts. I cannot fathom 6 and 7 year purchases. IMO, if it takes that long for you to pay it off, you are buying more than you can (should) afford.
I believe many of you missed the point about the bubble in auto loans. There is a boatload of subprime auto loans on the market and many of them are packaged off and sold to Wall St for them to do their magical 10X value, call it AAA, get it insured and sell options on the options and whatever other nonsense they can conjure up.
I spent 10 years in auto, and from 00 to 05 in finance. The finance departments make a killing on subprime loans, added insurance, service contracts and other adds to take that original $20k loan up to $25 or even $30k without the interest added onto it. Many of those adds don't have the same life as the loan, so there is no discounting that off if it expires and the loan goes south. You can also add into that the reality that many of the manufacturers finance arms are the originators of the loans, Toyota Financial Services, Chrysler Financial, Ford Credit and the rest of them and it does have a slight effect on the manufacturer in some cases. (some of them are no longer wholly owned by the manufacturer) However, the brunt of the burden is probably going to end up in the taxpayers lap if it goes south...
Markets already anticipate student and auto loans defaulting but those are not bubbles. Just keep buying your assets, as people have done for hundreds of years, and stop worrying about so much nonsense you can't control.
I can't believe people think cars are more complex than the human body. This forum is always good for a laugh.
No one seemed to have a problem with financing a car 20 years ago when rates where much higher and the cars' lifespan was less. But now theres a problem if 2 years are added to the term at lower interest rates and the car lasts 5 years longer?
We can argue about the intelligence of financing depreciating assets, but paying less over time for the depreciating asset makes sense.
Dave - only issue I have with the extended auto loans (6+ years) now is that I know many people that don't keep their vehicles that long, for various reasons, and these are usually the people that aren't the best with negotiating or doing their financing bits.
Sure, it is up to them, ultimately, but there is a predatory bit of play out there. Sometimes, the ones buying are young, and then their needs/family change, and a different vehicle is needed. Or, they buy just inside their means and then something happens and that vehicle must go.
These folks can end up upside-down with their payout amounts and it gets added into the next vehicle, so that vehicle is no longer a $20,000 vehicle, but a $25,000 vehicle, worth less than $20,000 as soon as they sign.
I've done 5 year loans. We like to keep our vehicles for a long while, but we did have an Acura TSX (2007) that we sold in 2014 because it was smaller than the wife currently needed (only 1 kid, but found herself hauling him, his friends, and sports gear around a lot. Got a Toyota Highlander Hybrid (Hybrid portion won't payoff for at least 8 years, but then will make a little dent to make up for the added cost). Larger, less efficient (not by much) on fuel, but doesn't require the premium gas and is a lot easier getting kids in and out and has the safety bits she likes (I don't use them, as I am old school, but will admit the backup camera is nice when backing out in an area that there may be kids or things laying around).
So, while I am with you on most of your argument on this, I will say that the longer term financing lends itself too much to predatory selling....and I've seen it happen with my brother and my friends....and it usually hits the less affluent....which may be why some folks don't see it/think about it.....it doesn't affect them at all.
I get you Boci, and this is a problem that permeates every consumer term purchase. Rent to own appliances is another good example. But that doesn't mean the washing machine industry is destined for oblivion.
Surely consumers get taken advantage of, which I why I ALWAYS stress knowledge and personal responsibility.
Folks have a choice of buying a Chevy Malibu for 22k or 32k. Personal decision and responsibility.
I do not buy the 29 percent, they are financed another way. I bought my wife a new mustang last year and intended to pay cash. They wanted 1400 dollars more to pay cash, still rattled I put 10k down on a 2 percent loan. Lol. Don't know what I was thinking at the time. My tractor is a zero percent loan. No need to pay cash, might as well use theirs. My CDs in the bank draw .67% interest.
I was in Lowe's hardware store the other day and during the check out asked if I had a Lowe's credit card. I did not but 1 minute later I did. Just got the card in the mail. The interest is almost 27 percent. I will pay the bill in full when the statement comes and cut the card up. 27 percent is NUTS
I can borrow against my CDs for 2 percent.
Mark NGC registry V-Nickel proof #6!!!! working on proof shield nickels # 8 with a bullet!!!!
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I just traded my 2003 BMW 325i with almost 190k miles on it for a new car (I didn't want to but it needed a lot of maintenance) for a 2011 Cruze and the dealer wanted me to finance it like crazy. I told him I wanted to pay cash every time but he probably talked about it well over 5 times, maybe even over 10.
@MorganMan94 said:
I just traded my 2003 BMW 325i with almost 190k miles on it for a new car (I didn't want to but it needed a lot of maintenance) for a 2011 Cruze and the dealer wanted me to finance it like crazy. I told him I wanted to pay cash every time but he probably talked about it well over 5 times, maybe even over 10.
They probably make more money on the financing than on the car itself.
@MorganMan94 said:
I just traded my 2003 BMW 325i with almost 190k miles on it for a new car (I didn't want to but it needed a lot of maintenance) for a 2011 Cruze and the dealer wanted me to finance it like crazy. I told him I wanted to pay cash every time but he probably talked about it well over 5 times, maybe even over 10.
They probably make more money on the financing than on the car itself.
A good finance department will average over $1000 in profit per car sold. That includes all cars sold, cash, financed or leased.
I like to keep a small fleet of 1997-1998 Jeep Grand Cherokees with the 4.0 liter inline 6 around.... Have had as many as 5 at one point..... I payed anywhere from $600-2000 depending on running condition and as long as you keep 1 quart of oil in it they will run forever.... I just sold one a few weeks ago for the same price I paid 4 years earlier and I put 65K miles on it with less than $1000 in parts and maintenance costs over that 4 years.... Upstate New York Winters are brutal on vehicles and i prefer to beat up a beater...
I keep a paid off 2010 Rav4 for summer trips and when I want to use a car that has been washed this decade
@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?
You fail to see the bigger picture, of which auto loans are just a small part.
The general trend has been for many people to finance more and more of their lives.
The result is that these people have less and less disposable income because their wealth is being transferred to the financial sector.
I bought a brand new car once. Probably never again. I prefer to take advantage of someone else's depreciation loss. Here is my best example. 2006 Jaguar XKR (supercharged V8) Victory Edition. I bought this car last year with 30,000 miles on it for $24,000. In the glove box was the original window sticker. The price when new: $96,000.
@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?
You fail to see the bigger picture, of which auto loans are just a small part.
The general trend has been for many people to finance more and more of their lives.
The result is that these people have less and less disposable income because their wealth is being transferred to the financial sector.
I dont fail to see anything. The thread was about the instability of the automobile market/industry.
How people choose to spend their money is not my- nor your-responsibility. Is that trend in irresponsibility sustainable? No, it is not. But the world and humankind will not end because of it. Every crisis begets opportunity.
@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?
You fail to see the bigger picture, of which auto loans are just a small part.
The general trend has been for many people to finance more and more of their lives.
The result is that these people have less and less disposable income because their wealth is being transferred to the financial sector.
I dont fail to see anything. The thread was about the instability of the automobile market/industry.
How people choose to spend their money is not my- nor your-responsibility. Is that trend in irresponsibility sustainable? No, it is not. But the world and humankind will not end because of it. Every crisis begets opportunity.
No, this thread is about the financial soundness and types of debts of the average American household. That was the point of the article linked in the original post.
The average American is becoming less wealthy, while the few at the top of the financial industry are becoming more wealthy. In other societies, large disparities in living standards have been the spark for revolution. In America it seems that the middle class is fading.
@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?
You fail to see the bigger picture, of which auto loans are just a small part.
The general trend has been for many people to finance more and more of their lives.
The result is that these people have less and less disposable income because their wealth is being transferred to the financial sector.
Yep, just about all of their paycheck/s go to a banker or finance company. Many are likely financed to the hilt.
I have owned my iPhone for 4 years (5) now, and I've started looking for a new one since mine is mangled. I didn't know that many people don't even buy their phones anymore...they lease them. Not sure if it is due to the fact that most decent smartphones are $500-$800 or if people just want to upgrade their phone every year. Regardless, its another thing to have to pay for every month and you don't actually own an asset at the end of the day.
@ShadyDave said:
I have owned my iPhone for 4 years (5) now, and I've started looking for a new one since mine is mangled. I didn't know that many people don't even buy their phones anymore...they lease them. Not sure if it is due to the fact that most decent smartphones are $500-$800 or if people just want to upgrade their phone every year. Regardless, its another thing to have to pay for every month and you don't actually own an asset at the end of the day.
A car and a phone are both horrible to look at as assets. They are assets, albeit depreciating assets that most often depreciate faster than the payment schedule most use to pay them off. Basically, most people owe more on these than they're worth, and they usually cost plenty in maintenance and upkeep, so looking at them as an asset is probably not the best idea. To my way of thinking, they're an expense and that's pretty much all they are.
Cars and phones are tools used to increase productivity. The value of such tools can be difficult to quantify. And like any tool, it is the skill of the user that is most important.
Broke the other front axle on the 4runner gold mining, $250 to fix.
Now rear end is leaking bad, cost will be $400-$500.
Scheduled another (biweekly) appointment with my mechanic.
I am comparing repair bills vs cost of new (used) 4runner 4WD
Repairing is still winning the game as I think I have broke and repaired almost everything now.
Originally I paid 4k for the used 4runner with a rebuilt 4 cylinder engine, but I soon got rear ended and got almost that whole amount when the insurance company said they wanted to total my truck and I said NO and negotiated a cash settlement.
Comments
'01 Pontiac Grand Am made it to 201K when I sold it and an '06 Pontiac Vibe was donated at 211K.
As long as we have cheap gas, no one cares about fuel economy and that is one of the reasons trucks are still very popular. Small dip in April truck sales; will be interesting what happens in May. F and GM are talking a good game but Wall Street hasn't been paying attention. I personally think F will be a single-digit stock before November and GM will have a 2-handle (again) in the same time frame.
The last several vehicles have been 3-year leases, usually obtained at the 'end-of-the-model year' blowouts. I cannot fathom 6 and 7 year purchases. IMO, if it takes that long for you to pay it off, you are buying more than you can (should) afford.
I believe many of you missed the point about the bubble in auto loans. There is a boatload of subprime auto loans on the market and many of them are packaged off and sold to Wall St for them to do their magical 10X value, call it AAA, get it insured and sell options on the options and whatever other nonsense they can conjure up.
I spent 10 years in auto, and from 00 to 05 in finance. The finance departments make a killing on subprime loans, added insurance, service contracts and other adds to take that original $20k loan up to $25 or even $30k without the interest added onto it. Many of those adds don't have the same life as the loan, so there is no discounting that off if it expires and the loan goes south. You can also add into that the reality that many of the manufacturers finance arms are the originators of the loans, Toyota Financial Services, Chrysler Financial, Ford Credit and the rest of them and it does have a slight effect on the manufacturer in some cases. (some of them are no longer wholly owned by the manufacturer) However, the brunt of the burden is probably going to end up in the taxpayers lap if it goes south...
Markets already anticipate student and auto loans defaulting but those are not bubbles. Just keep buying your assets, as people have done for hundreds of years, and stop worrying about so much nonsense you can't control.
I can't believe people think cars are more complex than the human body. This forum is always good for a laugh.
Knowledge is the enemy of fear
No one seemed to have a problem with financing a car 20 years ago when rates where much higher and the cars' lifespan was less. But now theres a problem if 2 years are added to the term at lower interest rates and the car lasts 5 years longer?
We can argue about the intelligence of financing depreciating assets, but paying less over time for the depreciating asset makes sense.
Knowledge is the enemy of fear
Dave - only issue I have with the extended auto loans (6+ years) now is that I know many people that don't keep their vehicles that long, for various reasons, and these are usually the people that aren't the best with negotiating or doing their financing bits.
Sure, it is up to them, ultimately, but there is a predatory bit of play out there. Sometimes, the ones buying are young, and then their needs/family change, and a different vehicle is needed. Or, they buy just inside their means and then something happens and that vehicle must go.
These folks can end up upside-down with their payout amounts and it gets added into the next vehicle, so that vehicle is no longer a $20,000 vehicle, but a $25,000 vehicle, worth less than $20,000 as soon as they sign.
I've done 5 year loans. We like to keep our vehicles for a long while, but we did have an Acura TSX (2007) that we sold in 2014 because it was smaller than the wife currently needed (only 1 kid, but found herself hauling him, his friends, and sports gear around a lot. Got a Toyota Highlander Hybrid (Hybrid portion won't payoff for at least 8 years, but then will make a little dent to make up for the added cost). Larger, less efficient (not by much) on fuel, but doesn't require the premium gas and is a lot easier getting kids in and out and has the safety bits she likes (I don't use them, as I am old school, but will admit the backup camera is nice when backing out in an area that there may be kids or things laying around).
So, while I am with you on most of your argument on this, I will say that the longer term financing lends itself too much to predatory selling....and I've seen it happen with my brother and my friends....and it usually hits the less affluent....which may be why some folks don't see it/think about it.....it doesn't affect them at all.
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
I get you Boci, and this is a problem that permeates every consumer term purchase. Rent to own appliances is another good example. But that doesn't mean the washing machine industry is destined for oblivion.
Surely consumers get taken advantage of, which I why I ALWAYS stress knowledge and personal responsibility.
Folks have a choice of buying a Chevy Malibu for 22k or 32k. Personal decision and responsibility.
Knowledge is the enemy of fear
I do not buy the 29 percent, they are financed another way. I bought my wife a new mustang last year and intended to pay cash. They wanted 1400 dollars more to pay cash, still rattled I put 10k down on a 2 percent loan. Lol. Don't know what I was thinking at the time. My tractor is a zero percent loan. No need to pay cash, might as well use theirs. My CDs in the bank draw .67% interest.
I was in Lowe's hardware store the other day and during the check out asked if I had a Lowe's credit card. I did not but 1 minute later I did. Just got the card in the mail. The interest is almost 27 percent. I will pay the bill in full when the statement comes and cut the card up. 27 percent is NUTS
I can borrow against my CDs for 2 percent.
NGC registry V-Nickel proof #6!!!!
working on proof shield nickels # 8 with a bullet!!!!
RIP "BEAR"
Here is a link with some relevant information on US car loans. Whether you choose to trust the leader in fake news or not, is up to you
http://money.cnn.com/2017/05/19/news/economy/us-auto-loans-soaring/index.html
I recently heard a report indicating that about 30% of current car loans are considered to be sub-prime.
2003 Wrangler Rubicon here
Successful transactions with : MICHAELDIXON, Manorcourtman, Bochiman, bolivarshagnasty, AUandAG, onlyroosies, chumley, Weiss, jdimmick, BAJJERFAN, gene1978, TJM965, Smittys, GRANDAM, JTHawaii, mainejoe, softparade, derryb
Bad transactions with : nobody to date
Debt - fuel for gold. Bad debt - 101 octane.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My 2003 Explorer just passed 100k miles in March!
I just traded my 2003 BMW 325i with almost 190k miles on it for a new car (I didn't want to but it needed a lot of maintenance) for a 2011 Cruze and the dealer wanted me to finance it like crazy. I told him I wanted to pay cash every time but he probably talked about it well over 5 times, maybe even over 10.
They probably make more money on the financing than on the car itself.
A good finance department will average over $1000 in profit per car sold. That includes all cars sold, cash, financed or leased.
I like to keep a small fleet of 1997-1998 Jeep Grand Cherokees with the 4.0 liter inline 6 around.... Have had as many as 5 at one point..... I payed anywhere from $600-2000 depending on running condition and as long as you keep 1 quart of oil in it they will run forever.... I just sold one a few weeks ago for the same price I paid 4 years earlier and I put 65K miles on it with less than $1000 in parts and maintenance costs over that 4 years.... Upstate New York Winters are brutal on vehicles and i prefer to beat up a beater...
I keep a paid off 2010 Rav4 for summer trips and when I want to use a car that has been washed this decade
Successful trades.... MichaelDixon,
You fail to see the bigger picture, of which auto loans are just a small part.
The general trend has been for many people to finance more and more of their lives.
The result is that these people have less and less disposable income because their wealth is being transferred to the financial sector.
I bought a brand new car once. Probably never again. I prefer to take advantage of someone else's depreciation loss. Here is my best example. 2006 Jaguar XKR (supercharged V8) Victory Edition. I bought this car last year with 30,000 miles on it for $24,000. In the glove box was the original window sticker. The price when new: $96,000.
I dont fail to see anything. The thread was about the instability of the automobile market/industry.
How people choose to spend their money is not my- nor your-responsibility. Is that trend in irresponsibility sustainable? No, it is not. But the world and humankind will not end because of it. Every crisis begets opportunity.
Knowledge is the enemy of fear
No, this thread is about the financial soundness and types of debts of the average American household. That was the point of the article linked in the original post.
The average American is becoming less wealthy, while the few at the top of the financial industry are becoming more wealthy. In other societies, large disparities in living standards have been the spark for revolution. In America it seems that the middle class is fading.
Whistle past the graveyard at your own peril.
So don't be average.
And I don't know how to whistle.
Knowledge is the enemy of fear
Yep, just about all of their paycheck/s go to a banker or finance company. Many are likely financed to the hilt.
I have owned my iPhone for 4 years (5) now, and I've started looking for a new one since mine is mangled. I didn't know that many people don't even buy their phones anymore...they lease them. Not sure if it is due to the fact that most decent smartphones are $500-$800 or if people just want to upgrade their phone every year. Regardless, its another thing to have to pay for every month and you don't actually own an asset at the end of the day.
A car and a phone are both horrible to look at as assets. They are assets, albeit depreciating assets that most often depreciate faster than the payment schedule most use to pay them off. Basically, most people owe more on these than they're worth, and they usually cost plenty in maintenance and upkeep, so looking at them as an asset is probably not the best idea. To my way of thinking, they're an expense and that's pretty much all they are.
Cars and phones are tools used to increase productivity. The value of such tools can be difficult to quantify. And like any tool, it is the skill of the user that is most important.
Knowledge is the enemy of fear
Broke the other front axle on the 4runner gold mining, $250 to fix.
Now rear end is leaking bad, cost will be $400-$500.
Scheduled another (biweekly) appointment with my mechanic.
I am comparing repair bills vs cost of new (used) 4runner 4WD
Repairing is still winning the game as I think I have broke and repaired almost everything now.
Originally I paid 4k for the used 4runner with a rebuilt 4 cylinder engine, but I soon got rear ended and got almost that whole amount when the insurance company said they wanted to total my truck and I said NO and negotiated a cash settlement.
Never had monthly payments for this truck.