View Full Version : car loans - surprising figures
Since I am in the market to buy a newer car, an article in the Sunday paper caught my eye. I have been wondering why there are so many expensive, new cars on the road - just assumed that there must be a lot of rich people able to afford them. According to research by Moody Analytics (article in WSJ which I can't access), car purchases and leases are up 86.3% since 2009. The average loan amount for a new car in the third quarter of 2014 was $27,799 up 4% from the same period a year ago. Nearly one quarter of those loans had reapyment periods of 73 to 84 months up 16% from just two years earlier. So it would seem a lot of those new cars I am seeing are being financed to the hilt. Back when we had a loan on a car, the longest repayment period allowed was 48 months and that was considered a stretch. And I am in sticker shock at paying over $25K for a car in the first place much less financing it. Car love....I just don't get it.
Teacher Terry
1-11-15, 2:51pm
I also am shocked at the amount people spend on cars & how long the loans are. Another sad thing is that once the loan is over many people don't drive the car until it dies but trade it in on another new car-just stupid!
My car is 16 years old; I feel as if I'm rebuilding it one part at a time. :|(
Buying a used car is a risk, too. I'm not sure what the answer is.
It reminds me of those photos of unsold cars that are stockpiled worldwide (rather than sell at reduced rates) in order to keep the prices up. From what I read, those cars would no longer be driveable due to sitting too long.
http://www.zerohedge.com/news/2014-05-16/where-worlds-unsold-cars-go-die
It reminds me of those photos of unsold cars that are stockpiled worldwide (rather than sell at reduced rates) in order to keep the prices up. From what I read, those cars would no longer be driveable due to sitting too long.
http://www.zerohedge.com/news/2014-05-16/where-worlds-unsold-cars-go-die
Talk about misallocation of capital. What a waste.
iris lilies
1-11-15, 4:02pm
That average cost is just about what we paid for this house.
I remember when I first experienced the concept of being "underwater" on a loan. I wasn't in danger of losing my car, but it was so disheartening! This was only 8 years ago, when I bought my Prius. Previously we had just gone from beater to beater. So as joyful as it was buying a brand new car for the first time, that joy was definitely offset by the realization of the cost of that loan.
I paid it off early, and plan on driving it until it dies. In the meantime I have adopted the Dave Ramsey "sinking fund" concept to save money specifically for a new car purchase when I eventually need one. I have $400 taken out of my checking account and diverted to an online savings account every month, and it has given me such peace of mind knowing I won't have to kowtow to the banks for my next car.
iris lilies
1-11-15, 4:33pm
From the title of this thread, I thought it would show something surprising that only a small percentage of cars are financed or something like that. It's really no surprise that so many are financed.
kimberlyf0
1-11-15, 5:42pm
I remember when a 5 year car loan was the longest they went, and now 6 and 7 years does seem common. We financed our truck, but only because it was at 0%. That was for 3 years and we have 1 or 2 payments left; then we won't have any auto loans at all. Between the nearly 3YO truck and the nearly 6YO minivan I am hoping we drive without needing to buy another car for at least 10 years, and we plan we get 20+ years from the truck.
Car love....I just don't get it.
Meh, you can say that about anything. Wine, art, cars, education, vacations, pets, whatever. No harm if you can afford it and it makes you happy. I spent more on my last car than many would find reasonable, but I get a lot of enjoyment out of it. I think dmc has a thing for P cars but it's not going to put him on the street. The point isn't really about the nominal amount people spend, but how people spend beyond their means for no good reason. Not really a novel observation though.
On that note I'm off the wine store.... in my BMW :0!
At least I paid cash. :)
My sense is that most people's motivation to finance a car that is over their income level is not due to inherent enjoyment of driving but some perceived image of how they will look or feel driving it. Being ale to afford it is an entirely different scenario.
I bought a brand new 2014 Focus 4-door sedan in May. I don't remember exact price, but it was somewhere around $18K. I got a good price on my trade in 2005 Focus. Loan is for 60 months with a bit more than 3% interest rate, but I'm paying extra on my payment each month, so it will be paid off early.
I bought "medium" Focus. I chose a car with the winter package, which meant winter mats and trunk liner, plus heated seats and heated side mirrors. I love my heated seats! :) The technology had improved so much since I bought my 2005 car, that I got a very nice car for not a ton of money. My payment was originally a bit more than $300 a month. I know many people that have $400-$500+ car payments. I would have loved a 4x4 Ford Escape, but it wasn't in my budget, so I refused to get it. I see no reason to go massively in debt for a vehicle, but I like to have something fairly comfortable and nice to drive. I was sensible about it. My car also gets good MPG.
I have an absolutely horrible confession to make. Driving a really expensive luxurious car feels fabulous. It makes a person feel supremely confident and on top of things. One of my ex's used to let me drive his big Jaguar and although I always made fun of The Baroness, she was a remarkable beast.
No, I don't own one. I just can't see that fitting into my value system or my budget. Most of the time I drive a 2004 Matrix with a big ding in the fender, I paid cash for it and intend to drive it til the wheels fall off. But still, I understand how soothing and ... powerful it can feel to get behind the wheel of something extraordinary. There may be something to the whole compensation myth surrounding the Corvette, honestly, but I'm glad it hasn't made $80,000 cars a priority in my life.
I have an absolutely horrible confession to make. Driving a really expensive luxurious car feels fabulous. It makes a person feel supremely confident and on top of things. One of my ex's used to let me drive his big Jaguar and although I always made fun of The Baroness, she was a remarkable beast.
As a marketer by trade, I find car purchasing absolutely fascinating. My experience with high-end cars was this: my son had an opportunity to buy an old Beemer from a guy he taught golf lessons to. He bought the car (at a young age) but let's just say he abused the privilege so I commandeered the car for a couple of months.
At first it did feel kind of cool driving to work in this BMW. It certainly drove well, and had amenities that I wasn't used to (as you might imagine given my earlier post in this thread). But it just didn't feel "me." I wound up selling it quickly (frankly, after I took it to the BMW dealership for a couple of small repairs). I'm not saying it's good or bad to drive a BMW, but that's where I find the whole branding thing so fascinating--how car manufacturers are able to segment their targets with a bullseye!
Clearly, Yossarian and I are worlds apart from a marketing perspective. But it's so true that cars are like an expensive accessory, and some of us are Birkenstock people and others are Jimmy Choo. Fascinating stuff.
Teacher Terry
1-11-15, 8:36pm
I have had a few new cars in my life but now we buy lightly used about 2-3 yo & drive them until they die usually when they are around 14. Recently when my hubby needed a car we got a Toyota Corolla that was a 2008 but only had 28,000 miles on it since my friend did not drive much. That ended up being an awesome deal. My car is a Honda Accord & my hubby says he gets spoiled when he drives mine & his feels cheap then. Funny how a car can make a person feel. We always have a bigger car for trips & a small one for everyday use.
Clearly, Yossarian and I are worlds apart from a marketing perspective.
Maybe, maybe not. The marketing actually worked against me buying the car. But if you want rear wheel drive your choices are limited. Add in 350 horsepower, low curb weight, European spec suspension, sport transmission and a 50/50 weight distribution as requirements or desired elements and the pool is even smaller. So actually the marketing was a negative that was overcome by the engineering. I got here in spite of the marketing, not because of it. To me this is not an upscale accessory, it's more of a high end appliance. Like people who like to cook and buy a nice cooking knife. Do I need it, no. Do I enjoy it more than having the marginal cost in the bank, yes.
awakenedsoul
1-11-15, 9:56pm
My sense is that most people's motivation to finance a car that is over their income level is not due to inherent enjoyment of driving but some perceived image of how they will look or feel driving it. Being ale to afford it is an entirely different scenario.
I see a lot of that here in Los Angeles. I live in a working class neighborhood, but you should see the cars! Some of these trucks cost $90.000. I bought my home for $89,500. My neighbors across the street have their 17 year old daughter driving a Lexus! The sad thing is, their daughter got accepted into the Joffrey Ballet School and she had to turn it down. Her parents couldn't afford it. (It cost $5,000. for tuition.) They have six vehicles. I think it's kind of like being house poor.
The girl gave up dancing and went to Cosmetology School. She's cutting hair now. I hope she's happy. She just seemed so in love with dancing...I know she's talented, because Joffrey is one of the best schools in NYC.
ToomuchStuff
1-11-15, 11:34pm
Maybe, maybe not. The marketing actually worked against me buying the car. But if you want rear wheel drive your choices are limited. Add in 350 horsepower, low curb weight, European spec suspension, sport transmission and a 50/50 weight distribution as requirements or desired elements and the pool is even smaller. So actually the marketing was a negative that was overcome by the engineering. I got here in spite of the marketing, not because of it. To me this is not an upscale accessory, it's more of a high end appliance. Like people who like to cook and buy a nice cooking knife. Do I need it, no. Do I enjoy it more than having the marginal cost in the bank, yes.
Makes me think of why I am not into new vehicles. About the time I was thinking of considering one (when I paid my house off), what I wanted was no more (small truck, preferably extended cab). There are a lot of things I would like that you can't get.....
Vent windows
Gutters back again
Heated seats, that are NOT leather (give me cloth)
as examples...........
That average cost is just about what we paid for this house.
Ha ha. Reminds me how I paid $26,500 for my first house - probably the cheapest in the neighbourhood - in 2003 and $24,000 (split with DH at least) for my car in 2012.
We did finance our car, but only at 0.9% for 48 months. We were going to pay cash, but our savings accounts were paying 1.9% at the time, so the numbers didn't make sense to pay cash. Since then I've been making around 10% on most of my investments, so I really think financing was the right choice.
But yes, for most people, those long loans and financing is crazy. What happened to a car being a luxury? Young people treat having a nice car as normal now. We just drove beaters or didn't have a car. Though I did buy a car in my mid-twenties, and consider that my dumbest financial move ever, so I'm not exempt from bad car decisions.
Well, this should meet the requirements. I got my car from the wreckin' yard in 2001 for $1700, and put a 100,000 miles on it, since. Got my pickup for $200 from a neighbor who was going to haul it to the crusher. It had no engine or transmission, but I put one in that I just overhauled in 1980, that was in another pickup I had. Thiss saves mee a trip to the bank, to beg some lady for an auto loan. They both needed the batteries replaced during the cold snap---the batteries barely made it through last winter, but this time, they gave up. So, I went to the Wreckin' yard, and got a coupla choice batteries for $50. How do you like that?
rodeosweetheart
1-12-15, 11:56am
I am a car buying hybrid. I drive a Toyota Yaris, but at one time, in my 30's, I owned a Jaguar XKE. The worst thing (other than the fact that every time one drove it, something very expensive happened) was that young men would pull up beside me and want to race.
I get my love of cars from my dad, who drove an Austin Healy throughout the 60's. Gosh, that was a great car.
My favorite car that I have owned was my New Beetle, but I had to get rid of it when I came out of a coma and was paralyzed and could not work the clutch. However, I recovered, so I am still mad at myself for getting rid of that car. And for what it is worth, you can fit a wheelchair in the back of a New Beetle.
catherine
1-12-15, 12:28pm
My favorite car that I have owned was my New Beetle, but I had to get rid of it when I came out of a coma and was paralyzed and could not work the clutch. However, I recovered, so I am still mad at myself for getting rid of that car. And for what it is worth, you can fit a wheelchair in the back of a New Beetle.
My DD and I shared a New Beetle (2000), and we both loved it. DH and I had done some research on it and learned that it was the safest small car, so it made us feel better about buying it. My only complaint was that, for a small car, the gas mileage wasn't great (around 23mpg). Not sure if you had the same experience.
We hated selling it, but we had tons of fond memories, such as the time DD and I drove it from Houston to the NE on a wonderful 5 day road trip.
rodeosweetheart
1-12-15, 1:19pm
My DD and I shared a New Beetle (2000), and we both loved it. DH and I had done some research on it and learned that it was the safest small car, so it made us feel better about buying it. My only complaint was that, for a small car, the gas mileage wasn't great (around 23mpg). Not sure if you had the same experience.
We hated selling it, but we had tons of fond memories, such as the time DD and I drove it from Houston to the NE on a wonderful 5 day road trip.
That was my year, too! What an awesome car., so fun to drive. And yes, that is exactly the gas mileage we got, which was very irritating. I would have a hard time trading the Yaris in for one for that reason, since the Yaris is a gas mileage superstar. I've had mine 5 years now and it runs like a top. It is a hatchback and will fit two dog kennels, including one large enough for a Great Pyr.
My first car at age 17 was something probably no one here has ever even heard of - an Austin America. It was a little British car that looked a lot like the current MiniCooper. My second car was a 1959 Triumph TR-3 - white with a black racing stripe down the middle. That was one my bf talked my mother into buying though-it was ridiculously powerful and hard for me to drive. It wanted to go fast. In either car, I usually elicited responses from mail admirers while driving so for me it was purely about getting attention at that young age. I guess my image now is middle-aged woman in frumpy old Volvo but I'm OK with that. Being invisible has its merits.
My second car was a 1959 Triumph TR-3 - white with a black racing stripe down the middle. Oddly I don't remember the year of it but my first was a Triumph TR-7 white with black stripes convertible 5 speed. When it was broken (often) I had to drive one of the farm trucks - either a large ford with a ruined paint job (because I forgot to lock up the turkeys one night) or one of three Rancheros (3 in the tree).
My second car was a 1959 Triumph TR-3
Is that the one that looks like an MGA? Friend of mine's MGA was probably simultaneously both the most fun and impractical car I've used.
my first was a Triumph TR-7
A lot of Triumphs rolling here. I always wanted a TR-6 myself itself but at this rate will have to wait to retirement for that genre.
Triumph TR-7
The Shape of Things to Come.
ApatheticNoMore
1-12-15, 3:30pm
Oh I've always paid cash too. For small used cars. I guess I should waste my time thinking about expensive cars I can't afford because that would really add to my life somehow. Oh wait NOT. Especially as they are something I've never even desired (except for hybrids, I've considered it). One less desire, one less suffering. My first car was a toyota.
Young people treat having a nice car as normal now. We just drove beaters or didn't have a car. Though I did buy a car in my mid-twenties, and consider that my dumbest financial move ever, so I'm not exempt from bad car decisions.
Actually, many Millennials are gravitating to areas in which cars are not required. They get by on mass transit, taxis/Uber/Lyft, HourCars, and even bicycles. You can buy a lot of transit for the $30,000+ cost of a new car these days.
And I just read the other day (New York Times? AP?) that many more people are leasing cars these days. The appeal of that escapes me -- you never get rid of the car payment. The payment is lower than it would be to buy the car outright and you are driving a newer car. But...
We have always been of the drive-'em-till-they're-dead school. Frankly, I can't think of a car I'd want to replace my 13-year-old VW. Not that I have to pay for and feed. Especially the "pay for" part.
And I just read the other day (New York Times? AP?) that many more people are leasing cars these days. The appeal of that escapes me -- you never get rid of the car payment. The payment is lower than it would be to buy the car outright and you are driving a newer car. But...
Sadly I'm not surprised to read this. Every article I've ever read about how not to get screwed buying a car has some form of the advice to parse out the transaction into the cost of the new car, the amount being paid for the trade in, etc, because car dealers know that the typical uninformed buyer is focused mainly only on how much the monthly payment is.
My DD and I shared a New Beetle (2000), and we both loved it.
My wife has always been a Beetle fan, owning several of the old Beetles prior to her first New Beetle (2001, 5 speed manual, turbo) which she drove for 11 years before turning it over to our daughter. She replaced that with the newest Beetle (2012, 6 speed manual, turbo). There is an amazing amount of room in those things and the turbo engine coupled with a manual transmission allows it to perform like a Porsche. I can't speak highly enough about the modern Beetle's fun-to-drive quotient.
I spent the 90's and early 2000's driving sports cars such as a Mazda Miata, BMW convertible and a Nissan 350Z before finally deciding that it was important to be able to place both grandkids in the car at the same time, as well as being able to drive up a slight incline on snowy/icy roads. Seven years ago I decided to go with a very boring Ford Escape Hybrid. I made one payment on it and then put 175K miles on it (so far) without any additional expense other than routine maintenance. My goal is to get it to 250K miles, we'll see...
The only side effect, for me, of going from fun cars to practical cars is the , well, lack of fun. I made up for that by buying a motorcycle. Just because I'm getting old and gray doesn't mean I've gotta be boring.
iris lilies
1-13-15, 1:26am
Is that the one that looks like an MGA? Friend of mine's MGA was probably simultaneously both the most fun and impractical car I've used.
Yes.
A lot of Triumphs rolling here. I always wanted a TR-6 myself itself but at this rate will have to wait to retirement for that genre.
I had a white TR-6 and DH had a green one. His never ran, mine was pretty reliable for a few years, then not.
I love the Tr 6's but today if I could have one gifted to me it would be pinkytoe's TR-3.
ToomuchStuff
1-13-15, 7:40pm
The newer Beetles I don't quite get unless used. (friend bought one, and biodieseled it for his salesman/driving job. Was averaging around 50mpg, because he was able to get his supplies for free) To me the Golf makes more sense of the two (same platform, with more room due to hatchback).
That said, I do own an OLD Superbeetle. Inexpensive toy that I need to spend more time then money to finish up some stuff and use it as my around town fun car, come spring. (rebuild cracked steering wheel, clean out gas tank)
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