7 Million people are late with car payments

[splinter]

I was hand-to-mouth for many years. Really sucks being poor.
Credit can be helpful many. For some it is an inescapable abyss.

Now with a little bit of money and some assets I still live like a pauper.
Except perhaps for the new weekender Porsche.

 

[RamFan]

Originally Posted by 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.

.


This is a great comment. To touch base on number 4; when it comes to public transportation we've seen a lack of development. If you're in an urban setting typically public transportation is attainable, it is often a hassle, but is at the very least attainable. However, we're seeing a rise in suburban sprawl with a lack of public transportation expansion. I'll use where I live as an example, while I do live in the Chicagoland area, we essentially have zero public transportation options for movement within the suburbs. Depending on where you are specifically located you might have the Metra to hop on, but tracks here are point A to point B routes from downtown Chicago to the outermost suburb. So unless where you're trying to get it is literally in line with your location and Chicago it isn't very helpful. As a whole, the U.S. does a very poor job of public transportation compared to other countries.

 

[KGMtech]

Nice report if you are considering going into the repossession industry.

From a BITOG perspective, all those cars & trucks are driving around without oil services, possible bad tires and brakes. And they might be in the lane next to you?

 

[CT8]

Originally Posted by splinter
I was hand-to-mouth for many years. Really sucks being poor.
Credit can be helpful many. For some it is an inescapable abyss.

Now with a little bit of money and some assets I still live like a pauper.
Except perhaps for the new weekender Porsche.

Some people living with in their means, means buying a used Chevrolet Spark. Some people living with in their means, means a Lear jet. We all have the same opportunities some can excel some don't. Most are in between.

 

[BMWTurboDzl]

Originally Posted by SevenBizzos
There's a lot of info in that article that is worth noting.

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?



I think he means well distributed mass transit. For example I live in one of the top 10 metro areas in the US. We have mass transit but it is so fragmented that using it for my work commute would take me almost 2 hrs + 5 miles (commute to/from drop off/pick up point) of driving vs driving 9 miles (18 min) into the office. The US is and always will be car-centric.

 

[Job]

Car dealers will get almost anyone in a car who can sign their name and is over 18. Nothing new.

 

[KrisZ]

So there is a potential for nice supply surge in the used car market, I consider it good news, as long as my tax dollars will not be used to bail out failed businesses.

 

[DoubleWasp]

This is BITOG, so I know that I should post about how good my finances are, and lay the blame exclusively on mismanagement of the owners, but things are significantly more complicated.

There is a Devil's Triangle that exists in many areas:

1. Poor wages
2. Incompetent or Non-existent Public Transit
3. Long commutes

Where I live is an incredible example of that.

A typical request of even the most rudimentary employment is to provide proof that one has a motor vehicle in their name, and insurance. No, not for jobs that require driving for the job. Could be for a floor sweeper or telemarketing. Then, combine that with the simple fact that if one is late for transportation issues, one will simply be fired. Since almost nobody wants to hire full time workers anymore, a person will likely have to be on time for 2 jobs.

Logistic analysis? One must have a car, and breaking down before or on the way to work means the apocalypse. Only answer? A new car.

How are the wages? About the same as they were in 1998. Cost of living? Insane. A basic one-bed apartment starts at $1300 a month and works it's way up. One is pretty much beyond a $2000 a month point of breaking even. The chances of them earning that much are tough.

There's not a lot of ways to "manage" that situation. One either needs outside help, or they are living on the precipice of doom.

We are not the only area living in such a logistical nightmare for the common employee. Plenty others. Especially those where the weather patterns are significantly more aggressive and dangerous.

 

[JustN89]

Very few people out there know how to budget properly, and sales of all nature are taking advantage of this.


Mechanics buy tools on credit after being sold on the idea that "it's only $20/week" to get that nice tool box. $20 sounds easy enough, but $80/month over 4 years doesn't sound as fun and $3800 up front is nigh on impossible for a young mechanic.

People buy cars above their budget after being told "it's only a difference of $3 a day, just give up that coffee in the morning!". However, people rarely give up their coffee in the morning after buying that car because that coffee is only 3 dollars.

Countless furniture stores let you purchase furniture on credit with no credit history required.



We have made it easier and easier for people to buy things on credit and pay monthly payments and yet we've done nothing to teach these same people how to manage their monthly budget. Even if their budget could allow for a car payment, it often times requires cuts in other areas that people don't normally even consider due to the diminutive prices such as foregoing Starbucks, energy drinks, eating out at lunch, etc. etc.

 

[zorobabel]

Originally Posted by SevenBizzos
What has changed about the country's transportation network?

Some places have a very lacking transportation network. You're spoiled with Chicago which is at an european level.

 

[StevieC]

(August 7, 2018)

http://www.pewresearch.org/fact-tan...al-wages-have-barely-budged-for-decades/

Quote
On the face of it, these should be heady times for American workers. U.S. unemployment is as low as it's been in nearly two decades (3.9% as of July) and the nation's private-sector employers have been adding jobs for 101 straight months - 19.5 million since the Great Recession-related cuts finally abated in early 2010, and 1.5 million just since the beginning of the year.

But despite the strong labor market, wage growth has lagged economists' expectations. In fact, despite some ups and downs over the past several decades, today's real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.

The disconnect between the job market and workers' paychecks has fueled much of the recent activism in states and cities around raising minimum wages, and it also has become a factor in at least some of this year's congressional campaigns.

Average hourly earnings for non-management private-sector workers in July were $22.65, up 3 cents from June and 2.7% above the average wage from a year earlier, according to data from the federal Bureau of Labor Statistics. That's in line with average wage growth over the past five years: Year-over-year growth has mostly ranged between 2% and 3% since the beginning of 2013. But in the years just before the 2007-08 financial collapse, average hourly earnings often increased by around 4% year-over-year. And during the high-inflation years of the 1970s and early 1980s, average wages commonly jumped 7%, 8% or even 9% year-over-year.

After adjusting for inflation, however, today's average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

A similar measure - the "usual weekly earnings" of employed, full-time wage and salary workers - tells much the same story, albeit over a shorter time period. In seasonally adjusted current dollars, median usual weekly earnings rose from $232 in the first quarter of 1979 (when the data series began) to $879 in the second quarter of this year, which might sound like a lot. But in real, inflation-adjusted terms, the median has barely budged over that period: That $232 in 1979 had the same purchasing power as $840 in today's dollars. ... MORE IN THE ARTICLE


Don't forget about Shrinkflation. Where they shrink the portion that you get for the same price which skews the actual inflation rate so inflation should be higher but isn't. All this takes disposable income out of pockets of folks and well they start to fall behind in things like car payments because they don't realize that either their wages need to change or their living standards or they are unwilling to change or can't because better wages aren't available to them for whatever reason.

 

[Fitter30]

https://thehill.com/policy/finance/...egulation-of-banks-sending-bill-to-trump

When car dealers let a 20 year old making $450 a week purchase a new car for $20k sad. Not all the blame goes to the kid some has to go to schools that don't teach finance and lenders that don't care who they hose.

 

[KrisZ]

I don't really buy the argument that only a new vehicle can be trusted with transportation needs and that in order to keep that low wage job, one needs a brand new vehicle and a ton of debt.
I've seen it also being made for students bacuse they can't miss any classes.

If one burdens themselves with debt, often high interest debt, in order to keep a low wage job or to pursue a useless degree, one starts a nice cycle of chicken and egg thought process.

They are then forced to keep that low paying job, or after graduating are forced into a low paying job in order to service the debt. Then they cannot afford to lose the dead end job.
Rinse and repeat and you are stuck in a vicious cycle, all because originally you "could not afford" any potential downtime from a cheap, used vehicle.

 

[02SE]

Lack of discipline, and a lack of financial understanding, leading to living beyond their means.

I recall the local news interviewing a 20-something during the Government shutdown, he was some sort of .Gov employee.

Anyway, he said was worried about where his next meal was going to come from, while he was at least 200 lbs overweight, and playing video games (he had at least 50 @ $60.00 or so per game) on the latest gaming console, on a several thousand dollar 75" UHD TV.

He might have been better served to save some of his money for a rainy day...

 

[ArrestMeRedZ]

Bingo, Krisz, you nailed it.

In this country poor natives often don't realize they are poor.

I have had a lot of contact with landscaping workers from south of the border. They make it to work on time, they live comfortably, and manage to send half of their comparitively low wages home. You won't find one of them in a $1300 a month single apartment or driving a new car. There may be 8 coworkers in a 3 bedroom house, but it's clean, warm, a roof over their heads, and affordable. They may carpool to work in a 20 year old pickup, but it's maintained and reliable.

Simply live within your means. When I was young and poor I realized I couldn't afford finance charges, so I never financed anything. If you are so bad at math you don't realize that, you are going to be exploited for life.

 

[CKN]

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 ?



I borrowed $21,00.00 for my truck. I could have paid cash. The amount of interest for 5 years (if I don't pay it off early) is $1,500.00.

It's not a lot of interest IMHO-to borrow 20plus grand for 5 years.

 

[StevieC]

Originally Posted by ArrestMeRedZ
Bingo, Krisz, you nailed it.

In this country poor natives often don't realize they are poor.

I have had a lot of contact with landscaping workers from south of the border. They make it to work on time, they live comfortably, and manage to send half of their comparitively low wages home. You won't find one of them in a $1300 a month single apartment or driving a new car. There may be 8 coworkers in a 3 bedroom house, but it's clean, warm, a roof over their heads, and affordable. They may carpool to work in a 20 year old pickup, but it's maintained and reliable.

Simply live within your means. When I was young and poor I realized I couldn't afford finance charges, so I never financed anything. If you are so bad at math you don't realize that, you are going to be exploited for life.

So much for the American dream then?

 

[SwampSurvivor]

If I lived in a part of the country that didn't salt everything to death, I wouldn't even have anything under 20 years old. That drives a lot of people to continue buying new. It's not possible to daily drive something up here for 10 years unless you want to start paying serious coin just to keep up with parts rusting off. I said I was done with new vehicles, maybe this time I am, but when all three of my older rusty vehicles break at once .. it's frustrating. If I can keep the Subaru from rusting, it will be the last new car I will buy.

I have a much higher car payment than I ever anticipated. I walked into a dealer looking to pay cash for the new base model car I wanted, but they were offering 0% interest, so why not. It's way too easy to walk in and get a sub prime auto loan. I've been along with friends where the dealer will keep pushing the same payment, but extending the terms out to 8 years for a higher model car. Sure it's the same price, but an 8 year old car here in NY is worth nothing.

Where I live, one absolutely needs a vehicle or a means to carpool. We're too far out of the city to uber without it costing a ton. There's awful public transportation. I , personally, could probably bicycle to work as it's only 11 miles away--- but I'm way too afraid of being taken out by a distracted driver. If I didn't have hobbies that had me in remote places towing my camper with my German shepherd dog riding along, I would have just got a Nissan Versa or Mitsubishi mirage and called it a day.

I still might, who knows.

 

[zorobabel]

Originally Posted by Fitter30
https://thehill.com/policy/finance/...egulation-of-banks-sending-bill-to-trump

When car dealers let a 20 year old making $450 a week purchase a new car for $20k sad. Not all the blame goes to the kid some has to go to schools that don't teach finance and lenders that don't care who they hose.

Well a new car for $20k is pretty much an entry level car these days, and that is sad indeed. Most subcompacts start at $15-16k, add sales tax, dealer fees and scam first time buyer warranty and others traps and you're close to $20k.
On the other hand, finance should be taught by parents, and even for a 20 years old orphan, basic finance should have been mastered. It might be part of human nature, but a large percentage of the general population are impulsive, reckless with budgets and need to impress others - and that just can't be changed. Maybe Scotland is an exception )

 

[PimTac]

Originally Posted by StevieC
Originally Posted by ArrestMeRedZ
Bingo, Krisz, you nailed it.

In this country poor natives often don't realize they are poor.

I have had a lot of contact with landscaping workers from south of the border. They make it to work on time, they live comfortably, and manage to send half of their comparitively low wages home. You won't find one of them in a $1300 a month single apartment or driving a new car. There may be 8 coworkers in a 3 bedroom house, but it's clean, warm, a roof over their heads, and affordable. They may carpool to work in a 20 year old pickup, but it's maintained and reliable.

Simply live within your means. When I was young and poor I realized I couldn't afford finance charges, so I never financed anything. If you are so bad at math you don't realize that, you are going to be exploited for life.

So much for the American dream then?

Stevie, that is the dream. You have to start at the bottom. Very few get that running start. The "Dream" gives each individual the OPPORTUNITY to be successful. It is not given to anyone. Hard work and being smart about finances will help anyone achieve their goals.

Sadly, the education system nor parents teach financial responsibility. I was lucky to be raised by parents who endured the Depression and WW2. Those lessons have been invaluable.