7 Million people are late with car payments

[edyvw]

OK, can someone translate this to me:
https://www.washingtonpost.com/busi...noredirect=on&utm_term=.6772b194e0d8
I get that car in this country is matter of life and death. Been i those shoes (actually did not own car at all. Walked two hours to Wal mart in Alabama when I arrived to the US, and was without car for 9 months. If you want to understand disappointment of forgetting to buy tooth paste after walking two hours in Alabama heat, try it, it is interesting experience), and you really need vehicle to do pretty much anything, unless you live in NYC or Chicago.
But, what is this? Living above means? or is it indication that economy is actually not doing that good. Loans 14.5-20% interest rate? Geez, it is almost cheaper to buy car using credit card.

 

[Mr Nice]

Lots of people are bad with their finances and make poor choices.

 

[Chris142]

Originally Posted by Mr Nice
Lots of people are bad with their finances and make poor choices.

Yep. People buy a new car instead of a good used one. They also buy a more expensive car brand to commute with to their $12/hr job.

 

[Skippy722]

I think it's people buying way more car than they need, or buying new ones and just rolling over the negative equity. Been there, done that never again.

 

[mrsilv04]

Lots of people have no idea what it takes to live within their means... and even if they did, they still wouldn't want to.

The credit union that I belong to has a large parking lot full of repos behind its building, all of the time. They're part of the problem as well, because they'll apparently finance just about anyone for a new car, by the looks of it. They sure don't appear to be a responsible party in all of this either.

The most amusing part is the motorcycles, motorhomes, and campers that show up right before winter sets in. The fun is over for the 6 months... so instead of paying for it for the next 6 months and not be able to enjoy it... they just let the credit union take it back.

 

[SubyRoo]

It never ceases to amaze me the number of people I see cruising around in brand new very expensive diesel trucks. I would wager the majority of them don't even need a truck that size. I know of quite a few that are customers of mine that don't even use them for any kind of towing. The upgrade to the newest model every couple years is a must as well apparently.

 

[BMWTurboDzl]

I'll take a shot.


It's a combination of things. Student loans for degrees which have low earning potential. Unable or unwilling to reduce debt servicing by living at home after graduation. Auto financing terms which exceed factory warranty period. These individuals are cash poor so a $2k out of warranty repair bill could set them back a couple of months.

I don't think buying new vs used is the problem. In fact if I had kids I'd rather they buy cheaper new with a shorter finance period rather than financing used or buy used with cash because for the vast majority of car owners DIY is not feasible or too expensive.

 

[Kurtatron]

I think it can be summed up in one statement: lack of discipline. It takes discipline to say:

I don't need this short term satisfaction.
I need to be diligent about keeping my older car maintained.
I need to do my research buying a used car.
I won't care about what others think.

People are losing their ability to delay gratification for the sake of future well-being. The next recession is gonna be a real doozy.

 

[wander2039]

Originally Posted by Skippy722
I think it's people buying way more car than they need, or buying new ones and just rolling over the negative equity. Been there, done that never again.


Yup this! Knowledge of personal finance and responsibility in this country is seriously lacking, for supposedly being the greatest nation a bit disgusting.

Technically you can get around without a car if you choose to. I've rode over 10k on the bike to work and other errands. If a person can't afford the payment they need to closer to work and rethink their choices.

 

[redhat]

I am thankful to be in a very well financial position where I have been considering for the past couple months on what car to buy next. The wife's Civic is up this july and we're not going to keep it.

Thoughts have been, do we get an 08-15 era Accord automatic for her? Do I buy a new vehicle for me and give her the Taurus. Do I buy an older/used Tahoe?

Every idea had its pros and cons except one idea that had no cons... put some more money into the Accord, get back to driving that, and give the wife the Taurus. Getting rid of one car payment will be nice.

 

[Jimzz]

Similar thing is about to happen like the housing bubble.

Car companies already have more production than the market can sustain, see GM closing plants down even when turning a profit. There is bulk inventory right now and more people are getting behind.
So expect to see a lot of "deals" on new cars this year. But if the economy keeps slowing down may not do much good if people can;t afford to buy them.

 

[JHZR2]

Originally Posted by BMWTurboDzl
I'll take a shot.


It's a combination of things. Student loans for degrees which have low earning potential. Unable or unwilling to reduce debt servicing by living at home after graduation. Auto financing terms which exceed factory warranty period. These individuals are cash poor so a $2k out of warranty repair bill could set them back a couple of months.

I don't think buying new vs used is the problem. In fact if I had kids I'd rather they buy cheaper new with a shorter finance period rather than financing used or buy used with cash because for the vast majority of car owners DIY is not feasible or too expensive.



+1

 

[WyrTwister]

I have never understood how a lot of people make the car payments they assumabley do . Or the house payments .

The math just does not add up . Unless , maybe , you are getting a check from the government ?

 

[cjcride]

A lot of people buy a car with their hearts not their brains.

Economists get it wrong about half of the time. You are almost better off flipping a coin.

 

[SevenBizzos]

There's a lot of info in that article that is worth noting.

1) It says most of the borrowers have low credit scores and are under 30. To me this means people are jumping into this kind of debt without a budget. Only buy what you can afford. This could happen because this group hasn't been educated enough in budgeting or ignore their finances in the interest of having something material. The suggestion that this may also be caused by student loans is quite an assumption. Maybe they overborrowed on the school and that's what the problem is.
2) Michael Taiano stated that a car loan is someone's "No. 1 priority". This is concerning because your absolute top priority bills are: housing, utilities, and food. A car payment shouldn't even be top 10. Maybe another sign of poor financial education.
3) While the raw number of late payers is higher, the percentage (4.5%) is lower than is was nine years ago. So the number of borrowers has risen, but the late payers has declined. It's an important point here.
4) "Predatory lending practices and a lack of real transportation options leave many households trapped in debt with few ways out,". I have no idea what "lack of real transportation options" means. What has changed about the country's transportation network?

This article is more reflecting on how poorly people handle their personal finances, in any economy.

.

 

[JohnnyJohnson]

Originally Posted by WyrTwister
I have never understood how a lot of people make the car payments they assumabley do . Or the house payments .

The math just does not add up . Unless , maybe , you are getting a check from the government ?


Yes people just to smart to fail and we are ready to visit TARP II its time to let them fail and not bail them out this time.

 

[Joe1]

It's not good news. My thoughts are that it is a combination of financial illiteracy, living beyond means, entitlement, other debt, and poor planning.
I hardly see anyone driving a subcompact cheap car (Honda Fit) nowadays. Many of the paycheck to paycheck drive around in late model luxury autos.
A friend who recently reviewed rental applications for prospective tenants was shocked to see the car payments some had with a modest income. One prospective tenant in her late 20s had 120k in student debt, a loan on a late model BMW 3 series, 10k in credit card debt and a modest salary in the low 50s. He did the math and determined that she would not have enough cash flow to afford the apt. I believe that this is probably a common scenario.
My friend on the other hand has the rental condo paid off and drives an 07 Civic with 170k miles on it.

 

[ZZman]

Expensive cars and higher payments
High interest on iffy purchasers
Lower wages and higher health Ins
Student loan debt

 

[BigD1]

Originally Posted by Eric Smith
Technically you can get around without a car if you choose to. I've rode over 10k on the bike to work and other errands. If a person can't afford the payment they need to closer to work and rethink their choices.


Not happening here in rural America.

Sure I could ride a bike, but I like living. Too many idiots driving around looking at cellphones and infotainment systems.

Even the police are not immune to running over cyclists because of distracted driving.

 

[MasterSolenoid]

Originally Posted by Kurtatron
I think it can be summed up in one statement: lack of discipline. It takes discipline to say:

I don't need this short term satisfaction.
I need to be diligent about keeping my older car maintained.
I need to do my research buying a used car.
I won't care about what others think.

People are losing their ability to delay gratification for the sake of future well-being. The next recession is gonna be a real doozy.

I remember in the 1960's saving my 50 cent-a-Week allowance so I could buy a Bow & Arrow / took me Months to save.
I was soo excited to make that purchase.
And to this day, I still have good money habits (and NO debt problems).