Car loans hit $1 trillion for first time

[pinkytoe]

http://money.cnn.com/2015/11/16/autos/car-loans-trillion-dollars/index.html
I notice so many drivers now with very expensive cars where I live - way more than in the past. Ditto very expensive houses. I keep wondering how people afford these things - are their incomes really that high? Maybe they are but I wondered the same thing before the 2008 crash. This article implies that many drivers have large loans on their cars. Another I read said the average mortgage payment here is $3000 a month. I don't think this bodes well if there is any economic bad news in the near future.

[Ultralight]

Mind-blowing. Just mind-blowing.

[SteveinMN]

And the worst part (for those folks) is that on those 5-7 year loans, they're upside down a good number of those years. No place to be....

[Ultralight]

upside down

What does this phrase mean exactly?

[Alan]

What does this phrase mean exactly?
It means they owe more for the vehicle than it is worth.

[Ultralight]

It means they owe more for the vehicle than it is worth.

That is miserable. I owe more on my university degrees than they are worth! haha

[Tammy]

Upside down on an education :D

[Ultralight]

At least my car is paid off.

A trillion dollars is real money. How did we get ourselves into such a fix?

[rodeosweetheart]

http://money.cnn.com/2015/11/16/autos/car-loans-trillion-dollars/index.html
Another I read said the average mortgage payment here is $3000 a month. I don't think this bodes well if there is any economic bad news in the near future.

Wow, that is an enormous mortgage. Austin has really priced itself out of the market. Same thing is happening where my kids live, in Portland Maine. Already happened in Portland Oregon, where my other kid lives. They just bought in Maine much cheaper than they could rent--well, probably on par, but about three times the space, a beautiful yard, etc. To be a landlord in Portland--he said in the first hour their apartment went on the market, the landlord had 53 applications.

[Float On]

It doesn't take long for us to forget how bad it was just 8 years ago.

[Teacher Terry]

In the past people did not need gap insurance on their new cars like they do now. Overspending pure & simple.

[Ultralight]

Could this trillion dollars be a "bubble" that could burst?

[Teacher Terry]

Sure & people will be seeing their cars repossessed.

[Ultralight]

Would that ripple effect throughout the economy?

[JaneV2.0]

Wow, that is an enormous mortgage. Austin has really priced itself out of the market. Same thing is happening where my kids live, in Portland Maine. Already happened in Portland Oregon, where my other kid lives. They just bought in Maine much cheaper than they could rent--well, probably on par, but about three times the space, a beautiful yard, etc. To be a landlord in Portland--he said in the first hour their apartment went on the market, the landlord had 53 applications.

The Portland rental market is horrifying--and so is the general housing market there. (My friend just closed on a house in town; it sold a year ago for $90K less than they bought it for, and they're very satisfied because they sold their house for $10K over their asking price and were able to pay cash for the new one.) Portland has no rent control, so landlords are booting people out of their apartments and raising rents as high as the market will bear.

As far as car loans go, I guess it's a good sign that people are eager to incur $20K debts--it shows they're optimistic about the economy.

[Williamsmith]

The car loan situation is not comparable to the housing bubble. Subprime loans are not making up much of the car loans. If you have bad credit, you are gettin hammered with higher interest rates and longer terms. Most zero interest loans for new cars are going to credit worthy people. The window of pay back is much smaller than with the 30 year housing scam. And cars can be repossessed rather easily unlike fixed housing assets.

People need reliable transportation. They have budgeted a huge amount toward auto expenses and are willing to sacrifice other budgetary items to buy newer cars. Vocational skills like repairing your older car yourself are vanishing, this as a result of the true bubble of higher educational loans that will burst in the future. It is the higher education fantasy driven by college hucksters and racketeers that will drive the next bubble burst. Why do you think these kinds of loans are not covered in bankruptcy? Because it's a scam perpetrated on the future of this nation to keep our children indebted and slaves of the government.

Let them hem buy their cars.

[Ultralight]

...the true bubble of higher educational loans that will burst in the future.

What do you mean?

[bae]

I had to replace our loyal 18 year old Volvo wagon this year. I think it cost nearly $50,000 in 1998 dollars.

I was amazed and delighted to see how many good replacement choices existed today for <$30,000 in 2015 dollars.

[Alan]

I had to replace our loyal 18 year old Volvo wagon this year. I think it cost nearly $50,000 in 1998 dollars.

I was amazed and delighted to see how many good replacement choices existed today for <$30,000 in 2015 dollars.

I replaced my Ford Escape Hybrid several months ago as well, after 200,000 miles of excellent service. I'd been lusting after a turbo diesel for a while and finally purchased the premium edition of my favorite of the bunch. Within a month I found out it was one of the cars involved in an emissions scandal, then Friday, I hit a deer. I believe I also got excellent value for my dollars expended, but I could sure use a change of luck.

[bae]

I replaced my Ford Escape Hybrid several months ago as well, after 200,000 miles of excellent service. I'd been lusting after a turbo diesel for a while and finally purchased the premium edition of my favorite of the bunch. Within a month I found out it was one of the cars involved in an emissions scandal, then Friday, I hit a deer. I believe I also got excellent value for my dollars expended, but I could sure use a change of luck.

Ouch. One of my final contenders in the selection process was a VW diesel wagon, which was a bit smaller than I wanted (my dog is huge), but it almost won me over because of the "green" appeal and the diesel (I'm a big fan of diesel engines). I elected to get a boring Subaru wagon instead, which was a bit less expensive and offered 4WD (which is a nearly-necessary-to-have item here). I would have been very upset if I'd paid the higher price for the less-functional VW, and then had the emissions scandal hit.

Grrr. I don't think I'll be replacing my older Porsche anytime soon.

[Ultralight]

I know when my little 2012 Nissan Versa hatchback goes south on me I'll not be able to afford another car. So in between now and then I need to make sure I design my lifestyle in a way that can deal with this reality.

[Williamsmith]

What do you mean?

The system is predatory in an organized crime sort of way. Colleges are guaranteed tuition money. Default is not an option for students. The government can garner wages and has a minimum monthly payment. All interest is capitalized. Colleges therefore produce too many graduates in fields that are knowingly saturated. Amenities are constantly added to justify higher and higher costs. States have cut subsidies and students are paying more and more of their costs through loans. And the Expected Family Contribution rate is increasing to a level that can only be seen as threatening to the family's themselves. Because the perception is that a college education is necessary and because college education is so expensive......those that saddle themselves with this debt put themselves at disadvantage for earning retirement and savings. And they are a drag on their family until they get a job that realizes their potential.

when those jobs vanish......the bubble bursts.

[razz]

Question.
How accurate is the car loan statistic? In 2013 I bought a 'demo' (with 5,000km) Toyota Prius V which I love. I had the money but it was/is tied up in a good rate of interest and the car loan was interest-free at the time. I got a car loan for a portion. The cost of the vehicle would have been the same whether using that loan or paying cash so was not a scam.
How many other people have similar stories?

[JaneV2.0]

I took out a small used car loan (with my credit union's lowest rate) because I didn't want to draw down my savings. I paid it off in 18 months.

[Gardenarian]

Anyone know what the interest rate is on car loans? I'm sure it varies, but average?

I know a several people who just assume they will always be paying $3-400 per month for a car. They don't even think of saving up and paying cash for one. They might even HAVE the cash to buy a car outright, but for some reason opt to get a loan. Is there any logic in this at all? (Assuming it is not an interest-free loan.)

[ToomuchStuff]

At least my car is paid off.

A trillion dollars is real money. How did we get ourselves into such a fix?

What is this WE stuff.

Did you cosign for a BUNCH of people?:confused:

[Ultralight]

The system is predatory in an organized crime sort of way. Colleges are guaranteed tuition money. Default is not an option for students. The government can garner wages and has a minimum monthly payment. All interest is capitalized. Colleges therefore produce too many graduates in fields that are knowingly saturated. Amenities are constantly added to justify higher and higher costs. States have cut subsidies and students are paying more and more of their costs through loans. And the Expected Family Contribution rate is increasing to a level that can only be seen as threatening to the family's themselves. Because the perception is that a college education is necessary and because college education is so expensive......those that saddle themselves with this debt put themselves at disadvantage for earning retirement and savings. And they are a drag on their family until they get a job that realizes their potential.

when those jobs vanish......the bubble bursts.

Dystopian.

[Ultralight]

What is this WE stuff.

Did you cosign for a BUNCH of people?:confused:

Oh, I meant "we" as in our culture of debt. I have not cosigned for anyone for anything! LOL

I paid my five year car loan off in 18 months. My car is owned free and clear by me.

[SteveinMN]

I know a several people who just assume they will always be paying $3-400 per month for a car. They don't even think of saving up and paying cash for one. They might even HAVE the cash to buy a car outright, but for some reason opt to get a loan. Is there any logic in this at all? (Assuming it is not an interest-free loan.)
Fluidity. Peace of mind, maybe. Now that the average new car transaction runs above $30,000, paying cash moves a big chunk of money at one time. Yet the rest of life requires real money, too. (Them at grocery checkout: "Ooh. Seem to be short on cash this month. Can I interest you in one of the seats from my car?") Getting a loan is just getting another insurance policy that you won't be "car-poor". Not saying it's right; just saying it's done.

And that's aside from the people who have "perpetual" car loans because they like to drive new cars that don't need much maintenance, look nice, and have the latest conveniences, so they trade theirs in every three years or so.

[Ultralight]

My car is a Nissan Versa 2012 hatchback in black. It cost me about $16,000 all told.

Last year I started getting all these ads in the mail about how I can trade in or how I could buy another Nissan.

I only have 40k miles on this thing! What are they thinking?

[jp1]

My car is a Nissan Versa 2012 hatchback in black. It cost me about $16,000 all told.

Last year I started getting all these ads in the mail about how I can trade in or how I could buy another Nissan.

I only have 40k miles on this thing! What are they thinking?

They're thinking you must surely be tired of it and willing to take out a loan for something newer and fancier...

[jp1]

Having lived in NYC and now San Francisco my whole adult life I've never actually bought a car. (The idea of using one to commute seems really odd to me) I now own one because I inherited it. Thankfully SO works for a hotel with a large parking garage and gets free parking as a job perk. It's nice just letting it sit there all week. Otherwise it'd be a headache dealing with the car. I realize that I'm an outlier, but I can't imagine having an ongoing $300-400/month car payment.

[Williamsmith]

During the course of my married life I recall purchasing 18 new and used cars. The cost of state tax and transfer fees alone would have been about 17K. I currently own one vehicle with less than 8000 miles and make 0 % interest loan payments on another. My car frenzy is over. These two will last me a long time. I am a recovering car addict.

My state sales tax is increasing from 6% to 7.25%. thats over 2K for a $30,000 vehicle purchase. I could have used all that state tax money to defer the cost of college for my kids. Hindsight.

[kib]

I am mulling over how much - if any - of this was caused by the "cash for clunkers" program. A lot of reasonable old cars got pulled off the market. For a while you could barely buy a used car, it cost nearly as much as buying new with a higher interest rate, so why not buy new.

Example: If you had $7,000 to spend on a car, you couldn't find one. Given the choice between a new car for $18,000 with a .9% loan and a year-old car for $14,800 with a 5% loan, the used choice seemed silly.

Now people seem to have simply absorbed the idea that buying new "makes sense". (And also absorbed the idea that $45,000 for a car, regardless of their financial situation, is "reasonable".) But we're starting to see post-clunker-program used cars at reasonable prices again around here, so perhaps this concept of the essential $45,000 car purchase will fade again with time. ?

[bae]

(And also absorbed the idea that $45,000 for a car, regardless of their financial situation, is "reasonable".)

I simply could not bring myself to spend $45,000 for our newest car, for a vehicle that would spend 90% of its life driving 35mph or less, hauling dog food/groceries/supplies/gear/boats on chip-sealed or dirt roads. I think I paid $26,000-ish. And I could have easily written a check for a Maybach if I'd been so inclined. I think we spent $18,000 for the next-newest car we bought 2-3 years ago.

[kib]

Agreed, it boggles my mind that more-or-less anyone would spend that much except for truly extenuating circumstances. Then I look at what they're buying, either luxury sedans or thyroidally bloated trucks that seat six and carry one, and ... apologies to the fan base, but it reminds me that 100 is an average IQ, not a minimum.

ETA: I could, maybe, see spending that much on a classic if cars are truly your passion and hobby, but really, does a Ford Expedition (MSRP $53,000) really blow anyone's skirt up that much?

[Florence]

My ever dependable 2004 Honda Odyssey with 185,000 miles finally needed to be replaced. We had saved the money to replace it with a 2016 Honda Odyssey. I had to have a lift installed for my electric scooter but had saved the money for that also. I expect that this will be my last vehicle purchase but I'm saving up anyway. Not having a mortgage or car note makes saving a lot easier.

[SteveinMN]

Buying a vehicle brand new makes sense if you're holding on to it till it's beyond economic repair. Honestly, I've seen how a lot of people drive and (don't) take care of their cars; I want no part of the abuse and the deferred maintenance.

I bought my Jetta basically off the transporter: 3 miles on the odometer when I picked it up. I've got about 120,000 miles on it now and it's only halfway through its life as far as I'm concerned. But I know the car has gotten the right oil at the right time, it wasn't driven on short hops all the time and nobody was dumping the clutch at traffic lights, etc. DW's Kia was purchased new, too, mostly because it had been less than a year since that model's introduction, so there really were no used models to buy. We bought the floor model, so we got a good discount for all the fingerprints and door slamming the car had endured before we got it. No plans to trade this one in anytime soon, either. I like not having a car payment; even though both cars required sizable maintenace bills this year (milestone service points), it's still cheaper than continually buying new.

[Ultralight]

Buying a vehicle brand new makes sense if you're holding on to it till it's beyond economic repair. Honestly, I've seen how a lot of people drive and (don't) take care of their cars; I want no part of the abuse and the deferred maintenance.

I bought my Jetta basically off the transporter: 3 miles on the odometer when I picked it up. I've got about 120,000 miles on it now and it's only halfway through its life as far as I'm concerned. But I know the car has gotten the right oil at the right time, it wasn't driven on short hops all the time and nobody was dumping the clutch at traffic lights, etc. DW's Kia was purchased new, too, mostly because it had been less than a year since that model's introduction, so there really were no used models to buy. We bought the floor model, so we got a good discount for all the fingerprints and door slamming the car had endured before we got it. No plans to trade this one in anytime soon, either. I like not having a car payment; even though both cars required sizable maintenace bills this year (milestone service points), it's still cheaper than continually buying new.

This rationale helps me to be at peace with the fact that I bought my car new. haha

[kib]

We've done both new and used. Both of the used cars were desirable items bought when the price was right and sold while they were still going strong, basically we had $9,000 of rolling iron in our possession in 2009 and $9,000 in the bank from the sale of it in 2013, pretty much $0 cost other than standard maintenance. We also bought a brand new Fiat and wound up in Lemon arbitration over it. The Prius was bought new and so far a dream, although it was pricy I don't regret it. Different strokes, to me the issue is not so much new vs used or even cheap vs expensive, but appropriate (to circumstances and income) vs self entitled foot-shooting.

[pinkytoe]

does a Ford Expedition (MSRP $53,000) really blow anyone's skirt up that much
Apparently. I see a lot of those along with Cadillac Escalades, Range Rovers, etc... It's like huge vehicles are back again now that gas is cheap. I wish I understood the appeal of an expensive car but I don't. I try to imagine what I would buy if money were no object and a car doesn't even enter the picture.

[ApatheticNoMore]

Honestly, I've seen how a lot of people drive and (don't) take care of their cars; I want no part of the abuse and the deferred maintenance.

but of course you can research the maintenance of a car and anyone who smartly buys used probably has ... and gets it inspected by a mechanic etc..


Different strokes, to me the issue is not so much new vs used or even cheap vs expensive, but appropriate (to circumstances and income) vs self entitled foot-shooting.

yea they might know that information whether they can afford it or are shooting themselves in the foot, but unless you've seen their W2s or tax returns or something, you probably don't. Life is too short to worry about people buying expensive cars.


Apparently. I see a lot of those along with Cadillac Escalades, Range Rovers, etc... It's like huge vehicles are back again now that gas is cheap. I wish I understood the appeal of an expensive car but I don't.

the appeal of huge cars might be possibly less car repairs in addition to (paranoid need for) "safety". Whose car repair bills to fix up their car do you think are higher when an SUV has a collision with a subcompact? It's probably not the SUV .... of course this depends on who is at fault and what type of insurance coverage exists.

[Ultralight]

The sole reason I own a car is to go fishing. I have thought this for a while, but it is true.

I could do everything else via hoofing it, cycling, taking the bus, or getting a Car2Go membership.


When I first got my car it was because I thought I needed it for everything else in my life. But as I examine my lifestyle, it is really just the fishing that requires it.

Mixed feelings...

[SteveinMN]

Honestly, I've seen how a lot of people drive and (don't) take care of their cars; I want no part of the abuse and the deferred maintenance.but of course you can research the maintenance of a car and anyone who smartly buys used probably has ... and gets it inspected by a mechanic etc.
Well, you can and you can't. Carfax (and its competitors) are not guaranteed 100% complete. Most technicians will not be able to look at a car with, say, 30-40,000 miles on it and -- unless it's obvious right then -- know that the previous owner never changed the oil on time (or with the right grade) or that the car is on its third set of brakes because the previous owner drives like (s)he's in a rally or that the last timing belt replacement was a "mark and pray" job. You do take your chances on the purchase of any used item, though an inspection by someone familiar with what you're buying help avoid the obvious money pit.


the appeal of huge cars might be possibly less car repairs in addition to (paranoid need for) "safety".
Unfortunately, that just devolves to an arms race of who can drive the biggest vehicle. And, sadly, as the number of SUVs in ditches come winter-time shows, most buyers haven't a clue how to drive SUVs safely, greatly increasing their chances of accidents. With others.

And given that Jeep and Land Rover often fall at the unhappy end of owner and reliability surveys, I wonder if the buyers knew how many repairs they might be avoiding. Their money to spend, however.

[gimmethesimplelife]

I'm just glad I've found ways, in an a very sprawling and spread out metro area, to make living without a car work. On my income I truly could not afford a car and there would be no way I could save money if I owned a car. Even if I could afford a car, I'm so used to not having one now and to having to be more organized and to moving slower around town due to not having a car that I'd really miss being car less, I really believe I would. I will say that there are sacrifices you have to make if you don't have a car in a sprawling metro area, but the sacrifices I've had to make have helped me to live a simpler, lower cost life anyway, so not having a car meshes well for me. YMMV. Rob

[ToomuchStuff]

Oh, I meant "we" as in our culture of debt. I have not cosigned for anyone for anything! LOL

I paid my five year car loan off in 18 months. My car is owned free and clear by me.

So it isn't your culture?

I thought that was part of the whole multicultural thing? Your able to choose the best of the cultures to work for you.

[Williamsmith]

Because of the strOng dollar , this trend will continue. Auto makers have to make their living here at home and not in exports. So they will continue incentives that include 0% financing. Some who would pay cash, opt for financing to save on the purchase. But if the Fed loses its mind and suddenly believes the "recovering economy" fairytale, then acts on this by raising rates .5%........lookout.

[Ultralight]

So it isn't your culture?

I thought that was part of the whole multicultural thing? Your able to choose the best of the cultures to work for you.

In some ways this is my culture. In some ways it is not. This is a complex issue. I'd be happy to get into it, if you want.

I am generally okay with some aspects of multiculturalism. But it really depends on the cultures.

[ToomuchStuff]

In some ways this is my culture. In some ways it is not. This is a complex issue. I'd be happy to get into it, if you want.

I am generally okay with some aspects of multiculturalism. But it really depends on the cultures.

Try two after browser crash.
Not sure how this is your culture. Unless you are getting others declared non competent and taking over their finances, the ones you would have some responsibility for, are your elected officials. Everyone else, is as an adult. choosing to subject themselves to the influence of advertising and signing up for the debt themselves.