Author Topic: America's Auto Loan Debt Is Truly Out Of Control  (Read 1047 times)

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 8479
  • Debbie says...
    • View Profile

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 5012
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #1 on: October 03, 2019, 04:44:54 AM »
Just out of curiosity, I went to the Subaru site and they had tons of financing deals - 0% on 2019 models, 1.9-2.9% on 2020 models.

But then I went to the Ford site - 6.9% financing and they look more and more like the mortgage industry. They offer a loan with low payments for the "first few years." Then what?

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 4599
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #2 on: October 03, 2019, 06:31:49 AM »
This is one of those bombs waiting to go off.  We have  $1.1 trillion in car loans.  Once the recession is realized by the average American we'll have a food of near-new vehicles hitting the market with people just asking payment take-overs.  The problem will be that no one is going to want the bulk of them.

Brad

  • Inner Core
  • Hero Member
  • *
  • Posts: 2600
  • What, me worry?
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #3 on: October 03, 2019, 09:26:09 AM »
>mortgage

Pickup trucks cost a fortune.

Mackin USA

  • Inner Core
  • Hero Member
  • *
  • Posts: 2635
  • Abstract Artist
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #4 on: October 03, 2019, 10:26:10 AM »
Auto Loans Stretch To Eight Years To Accommodate Irresponsible Car Buyers  >:( >:( >:(
Mr. Mackin

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 5012
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #5 on: October 03, 2019, 03:53:36 PM »
The problem will be that no one is going to want the bulk of them.

One of the big issues is that car tech is at an inflection point. Smart cars, safety tech, self-driving, the change to new power trains (EV, PHEV) et cetera. So whereas five years ago a 10 year old car that was in great shape could be a steal. Whereas a car today is qualitatively different than a car five years ago and that's accelerating. So if you buy a car on an eight year loan today and go to sell it in five years, it's going to have to be a huge markdown.

>>Pickup trucks cost a fortune.

Yeah, it's astounding. Lots of those contractor trucks are over $50K

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 8479
  • Debbie says...
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #6 on: October 03, 2019, 04:06:53 PM »
>contractor trucks are over $50K

Most around here are hitting near $65k, I'd say.

>one of those bombs waiting to go off

And when it does, it's going to wipe out/reset the auto finance sector.

As EG points out, we're at a point in the auto industry where disruption is going to happen.  EVs are likely to could be cheaper to produce --perhaps far cheaper.

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 4599
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #7 on: October 03, 2019, 05:27:53 PM »
> To Accommodate Irresponsible Car Buyers

I know I have a radical opinion on the topic, but if it needs to be financed you probably shouldn't be buying it*.

*unless you absolutely need it for business

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 5012
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #8 on: October 03, 2019, 06:19:49 PM »
>>radical opinion

Not so radical. Dave Ramsey has been saying this as loud as he can for decades. So has Buckworks :-)

Much of the auto debt is driven by insecurity. And if I'm honest, I would say that I sometimes feel it too when I give someone a ride in one of my ratty old cars and sometimes almost feel a bit apologetic.

Rationally, I know that feeling is wrong, but a massive industry spends a huge amount of money trying to make you feel that your worth as a human is reflected by your clothes, your car and the fancy vacations you take. And with respect to the last part of that, I am culpable I must admit.

In our current society, you have to be strong to avoid debt, because so many people are selling it to you.

Quote
We need more nose jobs
We need more hair relaxers
More magazines telling us
There's something wrong with your face

  -- Dan Bern, "Rolling Away"

buckworks

  • Inner Core
  • Hero Member
  • *
  • Posts: 1043
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #9 on: October 03, 2019, 09:43:26 PM »
>> So has Buckworks :-)

Yes, and I'll keep saying it: Organize yourself so you live within your means.

And do everything you know how to avoid encumbrances on future income. Keeping your monthly obligations to a minimum is a major stress reducer.

Note the difference between monthly spending and monthly obligations. You can spend freely but pay for your goodies in full, don't commit to recurring payments if you can possibly avoid it.

>> give someone a ride in one of my ratty old cars

A ratty old car might actually be a financial badge of honor. Remember that trying to look rich is often a major hindrance to becoming rich.
We bought

rcjordan

  • I'm consulting the authorities on the subject
  • Global Moderator
  • Hero Member
  • *****
  • Posts: 8479
  • Debbie says...
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #10 on: October 04, 2019, 12:09:09 AM »
I've just returned from a local county fair.  A local auto dealer had lined up some new vehicles on display near the entrance.  Thinking about this thread, I went over and read the sticker on the big, black pickup truck ....$91k!!!!

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 4599
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #11 on: October 04, 2019, 12:26:19 AM »
I agree completely Buckworks.

In my early twenties I was living on a street that no one would actually live on if they had a choice.  One thing I noticed was that a lot of the people there were driving new cars.  I asked my housemate "What's up with these?" and she just replied "Poor people drive nice cars."

It seems like living within your means should be the default, but it certainly isn't.  I talk to my kids about the virtues of driving an inexpensive car.  It is liberating, if it gets a scratch you could just shrug it off, if it breaks and the repairs cost too much you could just go grab another one off of Craigslist.  One car I had a few years ago I drove for two years and sold it for the same price I bought it.

Also, the best things in life really are free or cheap.

littleman

  • Administrator
  • Hero Member
  • *****
  • Posts: 4599
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #12 on: October 04, 2019, 12:28:18 AM »
>$91k

::head shake::

Travoli

  • Global Moderator
  • Hero Member
  • *****
  • Posts: 768
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #13 on: October 04, 2019, 01:53:01 AM »
>"Poor people drive nice cars."

I just relocated to Austin. Directly behind the house are ~60 new "affordable program" (income qualified) town homes. EVERY SINGLE VEHICLE in that section is nicer than mine.

ergophobe

  • Inner Core
  • Hero Member
  • *
  • Posts: 5012
    • View Profile
Re: America's Auto Loan Debt Is Truly Out Of Control
« Reply #14 on: October 04, 2019, 03:44:11 AM »
A ratty old car might actually be a financial badge of honor.

Actually, Theresa once said it was one of the things that attracted her to me. She took it as a sign that our basic values were in sync. Buckworks has been shopping with her in Vegas and knows this well. Given my wife, my family, my friends, my in-laws, I'm reasonably inoculated against affluenza.

But the forces arrayed against you are powerful and sophisticated. Many people are not inoculated. Maybe they grew up poor and were always made to feel like less of a person, so they dreamed of being able to drive a nice car.

Then you take this massive, sophisticated sales and marketing machine and point it at them with both barrels. The car salesman doesn't ask "How much can you afford?" He almost always asks, "What kind of monthly payment are you looking for?" He's thrilled to set you up with eight years of financing. He's going to try every trick to hide the true cost. He's going to play to your fears, your insecurities, your vanity.

I understand why they are not able to resist. They lack the mental, financial and emotional tools. They lack a friend like Buckworks whispering in their ear. They are outgunned. And voilą! 1.1 trillion dollars in auto debt. Sad, but not hard for me to understand and empathize with.

At his old company, my brother used to run a workshop where he started by having people go through a magazine and estimate the percentage of space devoted to ads. Then he asked people to answer one question: "What is the kind of person these ads are telling you to be?"

They would discuss that for a while, and then he would ask a second question: "Is that the kind of person you WANT to be?" Just that one exercise was a powerful, life-changing tool for some people.
« Last Edit: October 04, 2019, 03:47:11 AM by ergophobe »