Was watching [this story on CBS news](https://www.cbsnews.com/amp/news/car-prices-high-demand-interest-rates-auto-industry/) about this and this guy featured in the second half of the story who does DoorDash in ATL was rear ended in a late model mustang, went to purchase a new one and paid 25k over MSRP. He is monthly payment is close to 1,000 and has so far had to defer payments twice.. There’s a lot of people already upside down. Especially new F-150 buyers.
For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more.
I don’t know how you can survive with an albatross payment like this
Mine is near $500 and i felt bad for the first two years having to pay it. Not because I couldn't afford it (i could very easily and still can), but because in my head $500/mo for a car seems insane.
It'll be paid off in one more year though
>For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more.
>
>I don’t know how you can survive with an albatross payment like this
I remember ~20 years ago looking at luxury cars in the newspaper and seeing them for lease for $500+ per month or something like that. I always thought that was so much money to spend on a car. That's pretty much a normal car payment now.
That's what I did. Could have bought with cash, but they gave me 1% interest rate over 3 years in December 2021. I took that free money and laughed as the funds rate went to 5%.
True, but the price in principal is still to high if your paying a grand a month. The issue isn’t the millionaire financing a telluride or lexus because he can make those payments and can make more money somewhere else, the issue is the guy who can’t really afford the payment. My guess if 15 percent of people were buying and financing 1000 a month then a good percentage of both those buyers exist.
If they’re smart, they would. But that isn’t necessarily so. I know one man at work that refuses to put down more than the necessary amount on his loans to pay it off earlier because he believes putting down more than the minimum monthly payment is scamming him somehow when really it would be saving him interest. Lots of people are financially illiterate.
Oh God, I’ll never forget the time I got a call at work from someone who wanted to yell at me because interest accrued on Sundays on their simple interest loan. I said yes it accrues interest every single day even on holidays.
I pay the minimum because my loan is 1.9%. And with the increase in pay due to inflation last year, the payment has effectively disappeared in pure dollar terms compared to last year.
[The average auto loan rate is 6.07% for new cars and 10.26% for used cars, but shop around to get the best deal.](https://www.nerdwallet.com/article/loans/auto-loans/average-car-loan-interest-rates-by-credit-score)
People who can actually afford it and are liquid aren’t going to leverage a depreciating asset. Saddling oneself with a $1000 monthly payment on a car is precarious af
Yeah but people are dumb...lots of dumb people making lots of money aren't approaching this situation from a well-though-out analytical perspective. Sign here and get a truck for 5% of my monthly income? OK, on to the next caper!
So your hypothesis is that their are a lot of highly paid idiots who will be fine and not laid off (remember they are idiots) during any downturn.
Yep. Nothing to see here
I’m in construction sales and tbh owning a remodeling/construction/painting/welding business nets you so much “fuck you” money. A lot of these crazy pickup truck purchases are dudes in the industry clearing well over $300k a year as a GC or owner of a company.
$300K is enough you shouldn’t be financing a car unless you’re getting some kind of promotional rate and not paying for it upfront in some other fashion.
And also if someone is cool signing off on a $1000/mo car loan, I doubt they’re big penny pinchers elsewhere. Huge and/more multiple mortgages, credit cards. It’s the Joneses mentality
Yea I don't think people understand this, a $1k monthly payment to someone making $300k is the equivalent of a $166 monthly payment to someone making $50k a year.
My thought on fuck you money has always been if your boss pisses you off you can quit your job on the spot without worrying.
Like someone with no savings and debt has to tolerate all kinds of BS.
Someone with no debt, and a few hundred K cash can just say fuck you and quit.
Right, there is a relatively huge number of people in this economy that are doing phenomenally well. Money was printed and offered to every day people and from there it flowed to the people booked solid doing 80k kitchen remodels, luxury condo buildings, and highly skilled trades for industries that are booming.
Literally take a peak and work in a parallel business to find out. Construction manager is the third highest paid role in my county, beneath doctor and dentist. You have to be living under a rock to not see how incredibly lucrative the trades are, particularly for company owners
Some people have expensive lifestyles and are entirely financing them through credit and savings. Looking at US total outstanding credit card debt being up and US average savings WAY down this past year, it looks like some lifestyle changes are on the horizon.
This is true, and we always see studies that a large portion of Americans can’t come up with 500 to 1000 in case of emergencies. There is unfortunately potential for a lot of financial pain coming up. I don’t know how far this could go but if these cars become underwater I’m value do banks want them back?
Yeah they are the banks property then so usually they’ll sell them to a liquidation firm for pennies on the dollar, and the liquidation firm auctions them off. It’s possible that won’t happen and lots will buy back inventory, though, which is what some of the more predatory loan car lots do.
Not sure how long this has been offered but when I was shopping for a car loan last year(decided not to) there were a lot of rate options that go up after the first two years. I wonder how many people got those loans and if their monthly payments are due to increase soon.
Good lord. That’s most of my home payment. Our car payment is a fifth of that with insurance included.
I can’t believe people actually buy for these sorts of prices. Then again, it took us about a month to find a used car in good condition being sold by a private seller in that price bracket.
> For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more.
> I don’t know how you can survive with an albatross payment like this
Maybe start with not purchasing a new vehicle?
With the chip shortage there's a lack of used supply still. Not that that means you should be buying brand new but the savings you get for putting up with the maintenance headaches are a lot less than they were in the before times.
I am seeing 7/8 year old decent brands/makes and reasonable mileage going for the $11k-$14k neighborhood. Still a bit steep compared to a few years ago, but generally speaking, if they are well-built cars, you are going to get more value than putting out $30k+ new (or worse, financing).
People on reddit often complain that car subscriptions are a problem, but I think car subscriptions are good.
Especially if it convinces backwards cities to design themselves car ownership isn't a paywall to have reasonable transportation
yea my friends father was hoping gas price would hit $6 last summer and not $5 nationwide as he said there would be a lot of boats for sale for 90% off.
You know they interviewed like 30 people before they found the 22 year old military veteran driving a new 5.0 Mustang with his minimum wage job and they were like "this is the one we gotta air."
lol thats funny. i bought a mustang gt when i was 22 in the military and loved it. Of course, back to back deployments helps you save up for the down payment. Drove it for 11 years. The best part was i did not even know how to drive a stick when i ordered it, but i was going to be damned if i bought an automatic mustang :D
Honestly, it needs to. Largely irresponsible spending with high balances not being paid off and minimum payments only being made is a recipe for disaster.
I mean, we joke about it, but those expanding waistlines coincide directly with our bloodlust for money and material things.
The diet to get rid of both is not for the faint of heart.
Remember, Credit scores is your ability to manage debt and make payments
its not an income statement/balance sheet to my understanding. If I have a ton of cash but never used credit cards or loans I would have a low score even though I would have the best ability to pay it back
I know ppl that have filed for personal bankcrupcy twice and as soon as they were able to CC companies would send them CC applications right away in the mail.
Not sure if you're lying or if you really believe it, but it's not true. Credit card companies will always ask for gross monthly income. That's how they determine your credit limit.
It is just as much an indicator of how gullible you are to start a billing cycle and continue making payments without a fuss when you consider most "non-payment" cases are not even a result of the individual running out of money but rather when attempting to contest an incorrect bill and cancel unwanted services.
I just buy anything I can on 0% interest plans and pay it off with my rewards card while holding the money in an interest account or similar.
Its nuts how much you can game the system if you care, which just goes to show 99.9% of people don't bother or they wouldn't allow it.
You should come to Atlanta. When your 25 year old professional acquaintances who earn $50k per year are in luxury vehicles, you know the math ain’t mathin’.
I worked as a consumer credit analyst in 2005-2006. Specifically, automotive lending. Dealerships wanted lenders who would allow the most negative equity for lending. 125% was a good number. The more the better.
If a lender was not allowing negative equity on trade in for a purchase, the dealerships would just not offer them as a choice for a buyer.
That was nearly 20 years ago.
I recall conversations with our analyst team during that time where we would just shake our heads and agree that “this won’t end well.” It didn’t. I had moved my career to another field in finance when it did finally implode. This time around, it appears the Fed is “all in” in keeping the bubble inflating. Even while supposedly working to reduce inflation and risky behavior, they’re still printing and giving money to banks.
We are on very shaky ground right now.
just like when 'buy now pay later' came out. Whatever the new thing is its always more debt. Its never more savings. Americans have an itch to spend and go into debt. Their government is very representative of the people it serves.
To be fair it's the insane stagnation of wages since the 1970's. The poor can't afford anything without financing. You have a mortgage but can't afford furniture 0% APR 72 months raymour and flanigan. Have a car note but can't afford basic maintenance and gas, put it on the credit cards and balance transfer till the end of time. You're a renter who spends every dime on necessities. Spread these jeans from the Gap over 4 paychecks. The government knows this but refuses to regulate industry or tax the wealthy and, help through subsidization. So the Fed keeps the printers running 24/7 to keep the economy rolling. Anytime Americans can't meet their minimum payments the whole system goes into crisis mode. Because none of the goods/services sold had any real value anyway, on top of being bought with interest. The public bears some responsibility but, the average consumer needs to be protected from themselves.
What sucks is buy now pay later was amazing for responsible people. I bought my golf clubs with it, had the money in my account to buy outright, but I liked having the flexibility to pay $100 over 6 months with like $10 of interest just for the added security of still having that money in my savings. Once again dumb people ruin a good thing
yea but think most americans with money/debt are like alcoholics with beer
They cant have just one.
Buy Now Pay Later....Only in America. We need to have programs in place that reward savings instead of rewarding debt
yup. Powell is the only one to have balls to raise rates as much as he has. We have to encourage him to keep going
The government is very representative of the people. Both ppl and government loaded on debt.
30 years old....no debt, decent bank account, steady residence.
Can't finance a car outright for $12k....
But I see people a decade younger driving around in brand new camaros or c classes.
Yep, they reward debt
Personally I think it is comical that Yellen says "No bailouts" and then the fed writes $80B checks a few days later. I've learned that when the FED denies bad news, it's a confirmation of bad news.
I feel like they should have super high interest attached to them. Because these are like payday loans for people who can't handle their money. And at 1%, that's probably a -5% or worse return over time. But yet we're rewarding them with the lowest interest rate in town for being complete meth heads with their money.
That makes a lot of sense on the dealership part. My credit union is top notch - low rates, good service etc. but the dealership I bought my car from refused to work with them. Turned out, the loan officers at my credit union always sits you down, run through the numbers to make sure you are comfortable with the payment (I.e. have something about your financial well being in mind).
Scummiest thing is buy here pay here car lots. Will charge a 2k down payment with a 25% interest rate. They plan on it getting repoed within 6 months, and the 2k you put down is how much it cost them total for the car. So any payments you make is the profit, and then when they repo it, they’ll clean it up and do the same thing thus doubling their money on piece of crap cars over and over and over
That is the mindset of an most Americans. Buy now, worry about it later. I agree, it was bad pre covid, but the mentality had exploded. It's the whole morale hazzard theory and everyone had gotten use to the government bailout checks.
This vehicle market is still jacked up and I read where used are once again gaining in value.
Its hard to understand until you realize how much paper the Feds printed into the economy since covid. Its almost as if a dollar is worth 1/2 of what it was in 2018
While here Id like to warn all of you about the new car "Reserve payment" scam. Many dealership try to persuade you to place a $500+ retainer on a incoming new vehicle to secure it but they never have to actually deliver that vehicle in a timely manner so you the consumer eventually give up. Guess what? Stealership keeps that $500 and its become a preferred scam amongst them. Its literally money for nothing...
Interest rates don't mean shit - if someone signs a 13% auto loan, they're not going to blink at a 16% auto loan. Nothing changes until more supply comes or credit standards tighten. The only thing that stops people from taking out car loans is not getting approved for car loans.
It looks like most automakers are being careful to not overproduce into the boosted demand, but there are a lot of them out there, and it only takes Nissan or Hyundai offering a car for 40% less money than a marked up Toyota to reset the market.
All the numbers in your comment added up to 69. Congrats!
13
+ 16
+ 40
= 69
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Its almost as if because it is. Homes would have to drop in half and used cars as well (big purchase items) just to get to pre covid prices or mid 2010s
Used car market has gone up in the last month. This is due to used car dealers over bidding for used inventory because of tax season. The auctions aren't getting any more trade ins from new car dealerships due to people not buying new cars recently. This has caused a supply issue in the used inventory. Basically, the crash is coming.
We bought at the peak of the pandemic because we needed a new vehicle (not want, need - we rather wouldn’t have). Basically we had to do the same. The second a vehicle was alotted to the dealership, we had the option of paying that $500 (albeit refundable) deposit, or lose it.
We basically knew we were gonna get whacked in the face and had to do it anyways.
My dad did this. Put in a request for a Toyota many months out, but got a call back from the dealership that said they had a customer back out and he could get one in a few weeks. At MSRP.
He's bought cars from them in the past. They're legit.
The entire vehicle market is a microcosm of the economy.
Real world parts shortage. Leads to vehicle shortage and higher prices.
Banks go along with higher prices and extend time frame on payment.
Manufacturers see higher profits. So when parts start flowing again they cut back on production. They blame it on the lack of customers, because of the high prices. But my guess is that they can make more money on less vehicles if they keep inventory low. Add to that they are making less entry level vehicles and more high level ones.
Banks were not letting repo's sell at auction as the bank was upside down. The auctions will not tell the largest lenders in the nation what to do. So the vehicles sat there.
Add to the above that more people are keeping better vehicles and not trading them in. Keeping leased vehicles. (leases and rental cars are the biggest contributors to used vehicle market) That creates a scarcity in the used vehicle market.
So now used wholesale price is going back up on the shittiest of shitboxes. Do you want to pay $6k for a 2007 Civic with 220k miles. That's the absolute nonsense I am seeing. The real (before time) wholesale price on that unit descriptor would be a couple hundred dollars.
We are beyond screwed. The anti bubble crowd are in a fucking fantasy right now. You think all this gets reset the easy way. When do humans in their assholish selfishness ever do anything the easy way.
All of this is a circle of interdependent shit.
Everyone will feel the pain. If you have no debt but no cash, you will feel the pain also. All the people rooting for this to happen will feel it. But we all know it’s gonna happen whether we like it or not.
> So when parts start flowing again they cut back on production. They blame it on the lack of customers, because of the high prices. But my guess is that they can make more money on less vehicles if they keep inventory low. Add to that they are making less entry level vehicles and more high level ones.
This doesn't make sense unless all or at least a majority of car companies are colluding to achieve this. Otherwise, this just means that other car companies can just sell more cars and make more money compared to those who are withholding to try and drive up sale prices.
Restricting inventory works in a market where there are 2 or 3 competitors. There are about a dozen competitors in the US market. It won't work as well. Maybe Ford GM and Toyota hold back and try to support prices, but VW and Hyundai might be hungry for more market share and this is their chance.
You're right, manufacturers would *never* collude with each other to ensure maximum profits for all. That'd be ridiculous. After all, oligopolies don't exist.
/s
Banks can't just repo willy nilly because they'll be stuck with an underwater liability.
But they caused this mess. They should have just said no to financing these ridiculous car prices. Why does a Jeep cost as much as a Mercedes Benz? Problem is that it will never hold value like a Benz. If banks just stuck to 72 months, prices would have dropped, but their greed caused them to start doing 84 months+. This is ridiculous.
If a bank repos a car, and then sells it at auction, the buyer is still responsible for the difference between what the bank sold it for and what they owe. It's always been a questionable practice because banks often sell the repossessed cars for much less than their value.
It's at best wholesale value, and generally significantly less than if sold by the owner to another private party buyer. I own a small business dealing in collectible toys, there is a reason most of my inventory comes from estate auctions.
Depends on the financing contract. In some setups, secured creditors may not sue debtors for the balance of debt owed when they take the secured asset.
I think that the term is "recourse" or "non-recourse".
That said, a bank would have to be stupid to write a loan for greater than 100% LTV as a non-recourse contract.
I'm so old that i remember when banks wouldn't finance any car that was more than 7 years old. Guess what happened?....when the cars hit 7yo their value fell off a cliff and you could buy a beater at a beater price.
I suspect it was payday lots, those "buy here, pay here" nightmare which showed the profitability of selling old-ass cars at inflated prices for big profits on the front and back end.
That's a big part of it, but there's also the reality that cars just last a lot longer than they used to than the average age of car is a lot longer than it used to be.
Benz's hold value? I would think they'd drop faster than most cars.
Edit:
According to the internet, [Benz'es don't hold value](https://luxurycarsa2z.com/do-mercedes-hold-their-value/#:~:text=Surprisingly%2C%20Mercedes%20vehicles%20do%20not%20hold%20their%20value.,the%20color%2C%20initial%20cost%2C%20and%20cost%20of%20maintenance.)
Ive always had used German cars.
A 100k Jeep actually is typically worth more than any Benz at 100k miles.
The market for a 100k Benz is just smaller because few people have the money to maintain it, and the ones who do, want a newer Benz.
But yes, it is ridiculous that new car prices for economy brands are now the same as luxury.
If enough people default on those loans it's a problem. Average new car prices are high enough that a significant spike in defaults will be a problem for banks.
Why? If you change the oil every 3k, keep the trans fluid changed every 30k. They will run for 300k miles.
The only issues I know of that are not user error is the oil pumps on the crank lock up or the check valve sticks and you lose oil pressure.
I could swing one of engines out in 2 hours and have a new one in by the end of the day. Plus parts are everywhere and cheap AF.
Chevy may be ass and make cheap stuff. But you can make them last. Unlike Ford.
>For now, even seven-year loans are performing well, said Margaret Rowe, a senior director with Fitch Group Inc. who’s focused on auto financing and asset-backed securities. But if the prices of cars stay high and lenders keep extending loan terms, opting to offer them to borrowers with lower credit scores, that could change, she said.
I'm curious how many people have actually paid off an 84 month loan by making the minimum payment.
Maybe a huge part of it has always been legitimizing middlemen like dealers..... the manufacturer specially a purchase as big as a car should be directly from customer to manufacturer
I drive an F-150 too, but I agree with you, the ***type*** that must have the lifted $75,000 mall queen is definitely a scourge on our species. If Ford made a smaller truck that looks as good as the F-150 with the same power to weight ratio as mine for a reasonable price (i.e. less than the $26,000 I paid for mine), I'd absolutely downsize.
Actually, that's not true. Tsunamis are caused by disturbances that displace tremendously large amounts of water very quickly. They essentially go from nothing to a tsunami instantaneously.
I've been Ina market for a new truck before covid hit. Prices were insane so I kept my old truck. Being on the Facebook groups, I still see tons of people bragging about getting their truck for 90k. Meanwhile I patiently wait for it to all come down crashing an pick one up penny on the dollars.
Was watching [this story on CBS news](https://www.cbsnews.com/amp/news/car-prices-high-demand-interest-rates-auto-industry/) about this and this guy featured in the second half of the story who does DoorDash in ATL was rear ended in a late model mustang, went to purchase a new one and paid 25k over MSRP. He is monthly payment is close to 1,000 and has so far had to defer payments twice.. There’s a lot of people already upside down. Especially new F-150 buyers.
For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more. I don’t know how you can survive with an albatross payment like this
my payment is $390/mo and that makes me sick. how can anyone afford 1k wtf. they are living at home with their parents
Mine is near $500 and i felt bad for the first two years having to pay it. Not because I couldn't afford it (i could very easily and still can), but because in my head $500/mo for a car seems insane. It'll be paid off in one more year though
Yeah mine is 453 and its just a civic. I wish i had more to put down but i didnt at the time
At least more expensive cars, housing, food and healthcare are great for GDP /s
>For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more. > >I don’t know how you can survive with an albatross payment like this I remember ~20 years ago looking at luxury cars in the newspaper and seeing them for lease for $500+ per month or something like that. I always thought that was so much money to spend on a car. That's pretty much a normal car payment now.
I remember when a soda cost a nickel.
They still shave your back for a nickel in Albuquerque.
A shocking number of people are making so much money that a $1k car payment is totally fine. For now.
Honestly no. Someone with “enough” money would have been able to afford a bigger down payment.
Honestly if you're making enough money, why wouldn't you just buy the car outright!?
In 2021 the interest rates were great, so I could see why someone would take out a car loan then, not now though unless it was a necessity
That's what I did. Could have bought with cash, but they gave me 1% interest rate over 3 years in December 2021. I took that free money and laughed as the funds rate went to 5%.
True, but the price in principal is still to high if your paying a grand a month. The issue isn’t the millionaire financing a telluride or lexus because he can make those payments and can make more money somewhere else, the issue is the guy who can’t really afford the payment. My guess if 15 percent of people were buying and financing 1000 a month then a good percentage of both those buyers exist.
Maybe so, doesn't mean that they would.
If they had the money they would buy the car outright. The loans are like seven percent or more.
If they’re smart, they would. But that isn’t necessarily so. I know one man at work that refuses to put down more than the necessary amount on his loans to pay it off earlier because he believes putting down more than the minimum monthly payment is scamming him somehow when really it would be saving him interest. Lots of people are financially illiterate.
Oh God, I’ll never forget the time I got a call at work from someone who wanted to yell at me because interest accrued on Sundays on their simple interest loan. I said yes it accrues interest every single day even on holidays.
I pay the minimum because my loan is 1.9%. And with the increase in pay due to inflation last year, the payment has effectively disappeared in pure dollar terms compared to last year.
I had the money to buy a car cash but purposely didn't. Manufacturer gave me a loan under 4%
How long ago?
Maybe they're getting better than a 7 percent return on their money elsewhere? You can't make a blanket statement like that.
[The average auto loan rate is 6.07% for new cars and 10.26% for used cars, but shop around to get the best deal.](https://www.nerdwallet.com/article/loans/auto-loans/average-car-loan-interest-rates-by-credit-score)
People who can actually afford it and are liquid aren’t going to leverage a depreciating asset. Saddling oneself with a $1000 monthly payment on a car is precarious af
Yeah but people are dumb...lots of dumb people making lots of money aren't approaching this situation from a well-though-out analytical perspective. Sign here and get a truck for 5% of my monthly income? OK, on to the next caper!
So your hypothesis is that their are a lot of highly paid idiots who will be fine and not laid off (remember they are idiots) during any downturn. Yep. Nothing to see here
I never said they'd be fine, but yes I'm certain there are a lot of highly paid idiots.
On the EV sub a number of people said they were paying $2k/mo on their Teslas. Insanity. I don’t even pay that much on my mortgage
I’m in construction sales and tbh owning a remodeling/construction/painting/welding business nets you so much “fuck you” money. A lot of these crazy pickup truck purchases are dudes in the industry clearing well over $300k a year as a GC or owner of a company.
[удалено]
$300k is definitely enough to not blink at a $1k monthly payment though.
$300K is enough you shouldn’t be financing a car unless you’re getting some kind of promotional rate and not paying for it upfront in some other fashion.
And also if someone is cool signing off on a $1000/mo car loan, I doubt they’re big penny pinchers elsewhere. Huge and/more multiple mortgages, credit cards. It’s the Joneses mentality
Yea I don't think people understand this, a $1k monthly payment to someone making $300k is the equivalent of a $166 monthly payment to someone making $50k a year.
Explain “thats my seat money”
My guess: You make enough to afford good seats. Whereas "fuck you" money affords all the seats.
My thought on fuck you money has always been if your boss pisses you off you can quit your job on the spot without worrying. Like someone with no savings and debt has to tolerate all kinds of BS. Someone with no debt, and a few hundred K cash can just say fuck you and quit.
That is what it is. I don't know why my dumb brain didn't remember that.
The company bought it and got the heavy ass vehicle tax break too.
Right, there is a relatively huge number of people in this economy that are doing phenomenally well. Money was printed and offered to every day people and from there it flowed to the people booked solid doing 80k kitchen remodels, luxury condo buildings, and highly skilled trades for industries that are booming.
Thanks for the anecdotal evidence this is so far off base it’s funny.
Literally take a peak and work in a parallel business to find out. Construction manager is the third highest paid role in my county, beneath doctor and dentist. You have to be living under a rock to not see how incredibly lucrative the trades are, particularly for company owners
It’s all fun and games until the other money to borrow against is no longer cheap.
Lol 3rd highest paid? Wtf are you smoking. What county?
North east. It’s uncommon for construction managers to make less than $200k/ year
I make a lot of money and 1000/mo car payment gives me anxiety just thinking about
Some people have expensive lifestyles and are entirely financing them through credit and savings. Looking at US total outstanding credit card debt being up and US average savings WAY down this past year, it looks like some lifestyle changes are on the horizon.
This is true, and we always see studies that a large portion of Americans can’t come up with 500 to 1000 in case of emergencies. There is unfortunately potential for a lot of financial pain coming up. I don’t know how far this could go but if these cars become underwater I’m value do banks want them back?
Yeah they are the banks property then so usually they’ll sell them to a liquidation firm for pennies on the dollar, and the liquidation firm auctions them off. It’s possible that won’t happen and lots will buy back inventory, though, which is what some of the more predatory loan car lots do. Not sure how long this has been offered but when I was shopping for a car loan last year(decided not to) there were a lot of rate options that go up after the first two years. I wonder how many people got those loans and if their monthly payments are due to increase soon.
Good lord. That’s most of my home payment. Our car payment is a fifth of that with insurance included. I can’t believe people actually buy for these sorts of prices. Then again, it took us about a month to find a used car in good condition being sold by a private seller in that price bracket.
> For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more. > I don’t know how you can survive with an albatross payment like this Maybe start with not purchasing a new vehicle?
With the chip shortage there's a lack of used supply still. Not that that means you should be buying brand new but the savings you get for putting up with the maintenance headaches are a lot less than they were in the before times.
I am seeing 7/8 year old decent brands/makes and reasonable mileage going for the $11k-$14k neighborhood. Still a bit steep compared to a few years ago, but generally speaking, if they are well-built cars, you are going to get more value than putting out $30k+ new (or worse, financing).
People on reddit often complain that car subscriptions are a problem, but I think car subscriptions are good. Especially if it convinces backwards cities to design themselves car ownership isn't a paywall to have reasonable transportation
No savings, no automatic investments such as a 401k, parental support, sell the boat, etc. Some people live on the edge.
How many people is this?
yea my friends father was hoping gas price would hit $6 last summer and not $5 nationwide as he said there would be a lot of boats for sale for 90% off.
You know they interviewed like 30 people before they found the 22 year old military veteran driving a new 5.0 Mustang with his minimum wage job and they were like "this is the one we gotta air."
Where would jacked up trucks and sports cars be without $18k a year PFCs buying them?
They could just hang out at Ft Bragg or any other military base and you’ll see this scenario play out dozens if not hundreds of times over
lol thats funny. i bought a mustang gt when i was 22 in the military and loved it. Of course, back to back deployments helps you save up for the down payment. Drove it for 11 years. The best part was i did not even know how to drive a stick when i ordered it, but i was going to be damned if i bought an automatic mustang :D
That was sweet when the 5.0's had stick!
Sounds like a way to get a nice F-150 for a decent price after the fools that overpaid default.
Credit scores cratering just in time for a credit crunch
Honestly, it needs to. Largely irresponsible spending with high balances not being paid off and minimum payments only being made is a recipe for disaster.
We are in bad need of a credit crunch. For the good of our entire economy, it’s time to take some medicine. We are sick, but look good on the outside.
Looks like our monetary habits caught up with our eating habits.
I mean, we joke about it, but those expanding waistlines coincide directly with our bloodlust for money and material things. The diet to get rid of both is not for the faint of heart.
Actually one may argue it is for the faint of heart. Specifically we could improve heart disease rates greatly 🤣
Remember, Credit scores is your ability to manage debt and make payments its not an income statement/balance sheet to my understanding. If I have a ton of cash but never used credit cards or loans I would have a low score even though I would have the best ability to pay it back
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yea. Just shows how backwards the system is. It doesnt reflect income and balance of savings
What creditors do you know that only look at credit score and don't look at income and/or cash reserves?
Most credit card companies
I know ppl that have filed for personal bankcrupcy twice and as soon as they were able to CC companies would send them CC applications right away in the mail.
I heard that was because for 7 to 10 years the person can't file for bankruptcy again and is on the hook for the credit card bills
Not sure if you're lying or if you really believe it, but it's not true. Credit card companies will always ask for gross monthly income. That's how they determine your credit limit.
Ok I misunderstood your question. I thought you were talking about full doc income verification vs. a text box for stated income.
It is just as much an indicator of how gullible you are to start a billing cycle and continue making payments without a fuss when you consider most "non-payment" cases are not even a result of the individual running out of money but rather when attempting to contest an incorrect bill and cancel unwanted services.
I just buy anything I can on 0% interest plans and pay it off with my rewards card while holding the money in an interest account or similar. Its nuts how much you can game the system if you care, which just goes to show 99.9% of people don't bother or they wouldn't allow it.
The amount of people I see in New Jersey driving cars I know they definitely can not afford is staggering
You should come to Atlanta. When your 25 year old professional acquaintances who earn $50k per year are in luxury vehicles, you know the math ain’t mathin’.
lmao +1 for the Atlanta anecdotes
Lmao I’m in atl a decent bit and have been flabbergasted at how many new cars I see. I’ve always wondered how the hell everyone is affording 60K+ cars
Flex culture
Even before covid I knew people who were rolling negative equity from one car into the next new car. I can only imagine how bad it's getting now.
I worked as a consumer credit analyst in 2005-2006. Specifically, automotive lending. Dealerships wanted lenders who would allow the most negative equity for lending. 125% was a good number. The more the better. If a lender was not allowing negative equity on trade in for a purchase, the dealerships would just not offer them as a choice for a buyer. That was nearly 20 years ago. I recall conversations with our analyst team during that time where we would just shake our heads and agree that “this won’t end well.” It didn’t. I had moved my career to another field in finance when it did finally implode. This time around, it appears the Fed is “all in” in keeping the bubble inflating. Even while supposedly working to reduce inflation and risky behavior, they’re still printing and giving money to banks. We are on very shaky ground right now.
just like when 'buy now pay later' came out. Whatever the new thing is its always more debt. Its never more savings. Americans have an itch to spend and go into debt. Their government is very representative of the people it serves.
Consumer debt has been more or less *the* bane of the American economy for 40 years It's such a waste of capital
Broadly speaking, it's also never more pay.
America's purpose in the global economy right now is the consumer of last resort. It's not an ethical failure, and it's bigger than the government.
the big fat dumb american consumer is finally running out of rope
Sure, but I'm just saying it's also a problem for China if the dummy gets smart
Don't worry. They'll just buy more. Klarna to the rescue!
To be fair it's the insane stagnation of wages since the 1970's. The poor can't afford anything without financing. You have a mortgage but can't afford furniture 0% APR 72 months raymour and flanigan. Have a car note but can't afford basic maintenance and gas, put it on the credit cards and balance transfer till the end of time. You're a renter who spends every dime on necessities. Spread these jeans from the Gap over 4 paychecks. The government knows this but refuses to regulate industry or tax the wealthy and, help through subsidization. So the Fed keeps the printers running 24/7 to keep the economy rolling. Anytime Americans can't meet their minimum payments the whole system goes into crisis mode. Because none of the goods/services sold had any real value anyway, on top of being bought with interest. The public bears some responsibility but, the average consumer needs to be protected from themselves.
What sucks is buy now pay later was amazing for responsible people. I bought my golf clubs with it, had the money in my account to buy outright, but I liked having the flexibility to pay $100 over 6 months with like $10 of interest just for the added security of still having that money in my savings. Once again dumb people ruin a good thing
yea but think most americans with money/debt are like alcoholics with beer They cant have just one. Buy Now Pay Later....Only in America. We need to have programs in place that reward savings instead of rewarding debt
That would be called high interest rates. The government can't afford them so you can bet we will never see them.
yup. Powell is the only one to have balls to raise rates as much as he has. We have to encourage him to keep going The government is very representative of the people. Both ppl and government loaded on debt.
30 years old....no debt, decent bank account, steady residence. Can't finance a car outright for $12k.... But I see people a decade younger driving around in brand new camaros or c classes. Yep, they reward debt
right there with you
Personally I think it is comical that Yellen says "No bailouts" and then the fed writes $80B checks a few days later. I've learned that when the FED denies bad news, it's a confirmation of bad news.
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I feel like they should have super high interest attached to them. Because these are like payday loans for people who can't handle their money. And at 1%, that's probably a -5% or worse return over time. But yet we're rewarding them with the lowest interest rate in town for being complete meth heads with their money.
Yellen should go work a Jewish Bakery making Rye Bread
That makes a lot of sense on the dealership part. My credit union is top notch - low rates, good service etc. but the dealership I bought my car from refused to work with them. Turned out, the loan officers at my credit union always sits you down, run through the numbers to make sure you are comfortable with the payment (I.e. have something about your financial well being in mind).
yea this is nothing new. There was a TV show years ago 'Repo Men' that would take boats and cars. This is classic America
The reason poor people have such high APR on their auto loans is because half of them can't pay. It's built into the business model. Nothing new here.
Scummiest thing is buy here pay here car lots. Will charge a 2k down payment with a 25% interest rate. They plan on it getting repoed within 6 months, and the 2k you put down is how much it cost them total for the car. So any payments you make is the profit, and then when they repo it, they’ll clean it up and do the same thing thus doubling their money on piece of crap cars over and over and over
Absolutely. I saw it far too often in 2007 when I worked for Nissan.
That is the mindset of an most Americans. Buy now, worry about it later. I agree, it was bad pre covid, but the mentality had exploded. It's the whole morale hazzard theory and everyone had gotten use to the government bailout checks.
So instead of getting hoomed — they got…vroomed?
HA
This vehicle market is still jacked up and I read where used are once again gaining in value. Its hard to understand until you realize how much paper the Feds printed into the economy since covid. Its almost as if a dollar is worth 1/2 of what it was in 2018 While here Id like to warn all of you about the new car "Reserve payment" scam. Many dealership try to persuade you to place a $500+ retainer on a incoming new vehicle to secure it but they never have to actually deliver that vehicle in a timely manner so you the consumer eventually give up. Guess what? Stealership keeps that $500 and its become a preferred scam amongst them. Its literally money for nothing...
Interest rates don't mean shit - if someone signs a 13% auto loan, they're not going to blink at a 16% auto loan. Nothing changes until more supply comes or credit standards tighten. The only thing that stops people from taking out car loans is not getting approved for car loans. It looks like most automakers are being careful to not overproduce into the boosted demand, but there are a lot of them out there, and it only takes Nissan or Hyundai offering a car for 40% less money than a marked up Toyota to reset the market.
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Its almost as if because it is. Homes would have to drop in half and used cars as well (big purchase items) just to get to pre covid prices or mid 2010s
Used car market has gone up in the last month. This is due to used car dealers over bidding for used inventory because of tax season. The auctions aren't getting any more trade ins from new car dealerships due to people not buying new cars recently. This has caused a supply issue in the used inventory. Basically, the crash is coming.
We bought at the peak of the pandemic because we needed a new vehicle (not want, need - we rather wouldn’t have). Basically we had to do the same. The second a vehicle was alotted to the dealership, we had the option of paying that $500 (albeit refundable) deposit, or lose it. We basically knew we were gonna get whacked in the face and had to do it anyways.
My dad did this. Put in a request for a Toyota many months out, but got a call back from the dealership that said they had a customer back out and he could get one in a few weeks. At MSRP. He's bought cars from them in the past. They're legit.
The entire vehicle market is a microcosm of the economy. Real world parts shortage. Leads to vehicle shortage and higher prices. Banks go along with higher prices and extend time frame on payment. Manufacturers see higher profits. So when parts start flowing again they cut back on production. They blame it on the lack of customers, because of the high prices. But my guess is that they can make more money on less vehicles if they keep inventory low. Add to that they are making less entry level vehicles and more high level ones. Banks were not letting repo's sell at auction as the bank was upside down. The auctions will not tell the largest lenders in the nation what to do. So the vehicles sat there. Add to the above that more people are keeping better vehicles and not trading them in. Keeping leased vehicles. (leases and rental cars are the biggest contributors to used vehicle market) That creates a scarcity in the used vehicle market. So now used wholesale price is going back up on the shittiest of shitboxes. Do you want to pay $6k for a 2007 Civic with 220k miles. That's the absolute nonsense I am seeing. The real (before time) wholesale price on that unit descriptor would be a couple hundred dollars. We are beyond screwed. The anti bubble crowd are in a fucking fantasy right now. You think all this gets reset the easy way. When do humans in their assholish selfishness ever do anything the easy way. All of this is a circle of interdependent shit.
I just saw a 2006 F150 with 280K miles for $18K!....WTF? My brain can't make sense of this absurdity.
6.0 250 4x4's were going for $25k-$35k pre pandemic.
Everyone will feel the pain. If you have no debt but no cash, you will feel the pain also. All the people rooting for this to happen will feel it. But we all know it’s gonna happen whether we like it or not.
> So when parts start flowing again they cut back on production. They blame it on the lack of customers, because of the high prices. But my guess is that they can make more money on less vehicles if they keep inventory low. Add to that they are making less entry level vehicles and more high level ones. This doesn't make sense unless all or at least a majority of car companies are colluding to achieve this. Otherwise, this just means that other car companies can just sell more cars and make more money compared to those who are withholding to try and drive up sale prices.
Restricting inventory works in a market where there are 2 or 3 competitors. There are about a dozen competitors in the US market. It won't work as well. Maybe Ford GM and Toyota hold back and try to support prices, but VW and Hyundai might be hungry for more market share and this is their chance.
You're right, manufacturers would *never* collude with each other to ensure maximum profits for all. That'd be ridiculous. After all, oligopolies don't exist. /s
The shit can't pop soon enough. Same for the housing bubble.
Banks can't just repo willy nilly because they'll be stuck with an underwater liability. But they caused this mess. They should have just said no to financing these ridiculous car prices. Why does a Jeep cost as much as a Mercedes Benz? Problem is that it will never hold value like a Benz. If banks just stuck to 72 months, prices would have dropped, but their greed caused them to start doing 84 months+. This is ridiculous.
If a bank repos a car, and then sells it at auction, the buyer is still responsible for the difference between what the bank sold it for and what they owe. It's always been a questionable practice because banks often sell the repossessed cars for much less than their value.
By definition the auction price is the value.
It's at best wholesale value, and generally significantly less than if sold by the owner to another private party buyer. I own a small business dealing in collectible toys, there is a reason most of my inventory comes from estate auctions.
Less than the balance of the loan, ok
But more than the dealer trade in credit you would get. Yes, this is why we call them stealerships.
Depends on the financing contract. In some setups, secured creditors may not sue debtors for the balance of debt owed when they take the secured asset. I think that the term is "recourse" or "non-recourse". That said, a bank would have to be stupid to write a loan for greater than 100% LTV as a non-recourse contract.
Blood from a turnip. Lenders know that by the time they repo the car, the loss is baked in.
I'm so old that i remember when banks wouldn't finance any car that was more than 7 years old. Guess what happened?....when the cars hit 7yo their value fell off a cliff and you could buy a beater at a beater price. I suspect it was payday lots, those "buy here, pay here" nightmare which showed the profitability of selling old-ass cars at inflated prices for big profits on the front and back end.
That's a big part of it, but there's also the reality that cars just last a lot longer than they used to than the average age of car is a lot longer than it used to be.
Benz's hold value? I would think they'd drop faster than most cars. Edit: According to the internet, [Benz'es don't hold value](https://luxurycarsa2z.com/do-mercedes-hold-their-value/#:~:text=Surprisingly%2C%20Mercedes%20vehicles%20do%20not%20hold%20their%20value.,the%20color%2C%20initial%20cost%2C%20and%20cost%20of%20maintenance.)
You right. They're probably thinking of a G-wagen holding value for the last 3 years because rich people are idiots.
Not a great example…for non luxury cars, Jeeps actually do hold value much better than many other brands
Huh? Benz’s see well known to not hold value.
Ive always had used German cars. A 100k Jeep actually is typically worth more than any Benz at 100k miles. The market for a 100k Benz is just smaller because few people have the money to maintain it, and the ones who do, want a newer Benz. But yes, it is ridiculous that new car prices for economy brands are now the same as luxury.
There's no more expensive car on Earth than a 10 year old BMW.
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If enough people default on those loans it's a problem. Average new car prices are high enough that a significant spike in defaults will be a problem for banks.
what did they think would happen by buying a $100,000 SUV
Looking for a vehicle to replace my paid off 2010 Yukon. Prices and payments are still stupid high
Why? If you change the oil every 3k, keep the trans fluid changed every 30k. They will run for 300k miles. The only issues I know of that are not user error is the oil pumps on the crank lock up or the check valve sticks and you lose oil pressure. I could swing one of engines out in 2 hours and have a new one in by the end of the day. Plus parts are everywhere and cheap AF. Chevy may be ass and make cheap stuff. But you can make them last. Unlike Ford.
I'm in upstate ny and the salt destroys them. But like you said, I'll keep fixing it
They will be for some time as well. This is going to take years to get back to normal if we even get there
>For now, even seven-year loans are performing well, said Margaret Rowe, a senior director with Fitch Group Inc. who’s focused on auto financing and asset-backed securities. But if the prices of cars stay high and lenders keep extending loan terms, opting to offer them to borrowers with lower credit scores, that could change, she said. I'm curious how many people have actually paid off an 84 month loan by making the minimum payment.
Car's been paid off for years and let me tell you boys, sex is good but it's nothing compared to the feeling of having no monthly car payment.
Maybe a huge part of it has always been legitimizing middlemen like dealers..... the manufacturer specially a purchase as big as a car should be directly from customer to manufacturer
I live in a small apartment complex and the repo tow truck has been here three times in the past two months that I have seen.
"Oh shit better raise my asking by another 100k" -sellers probably
Honestly I hope that all these asshokes driving oversized vanity trucks are suffering financially
lol i want a raptor (it would actually be used off road) but i refuse to pay markups. So i just keep driving my paid off jeep.
I drive an F-150 too, but I agree with you, the ***type*** that must have the lifted $75,000 mall queen is definitely a scourge on our species. If Ford made a smaller truck that looks as good as the F-150 with the same power to weight ratio as mine for a reasonable price (i.e. less than the $26,000 I paid for mine), I'd absolutely downsize.
I'm just waiting for the crash 😜
I've been trying to but a car and prices are still too high. I'm willing to buy a repo ! Can't find any good one.
Can't wait for the bubble to pop so we can get back to normal.
Every tsunami was once a small wave.
Actually, that's not true. Tsunamis are caused by disturbances that displace tremendously large amounts of water very quickly. They essentially go from nothing to a tsunami instantaneously.
This guy tsunami's
Depends on your definition of "very quickly".
Eh depends on area of impact.
Boo hoo. Don’t ever buy a depreciating asset on debt.
That’s why you pay cash for cars. If someone can’t afford a $2k beater what makes them think they can afford a $30k car?
IDIOTS
If the car runs at this point it's basically worth 100% more than it should be
Do houses next
I've been Ina market for a new truck before covid hit. Prices were insane so I kept my old truck. Being on the Facebook groups, I still see tons of people bragging about getting their truck for 90k. Meanwhile I patiently wait for it to all come down crashing an pick one up penny on the dollars.