7 Million people are late with car payments

[supton]

I can't imagine an 84 month car loan.

While ago I got curious about why mortgages were 30 years. Turns out I wasn't the only one--found an NPR (?) article about it. Turns out, after the Great Depression the government got involved to help people stay in their homes. Prior to then, mortgages were 5 year term, and interest only. During the Great Depression when people lost work and/or the bank wouldn't renew, people lost their homes.

Reason I mention that is, is an 84 month loan much more than finance charges? More like leasing with no intent to own (going to trade long before 84 months). Which I wonder about some home ownership, never going out to full term and paying off. Maybe nothing is new under the sun. Getting to the point where people never really own anything other than the clothes on their back...

All I know is that I'm bummed by this--my fleet isn't getting newer, and a nice factory backed 0% APR (or similar) would be nice to slide into at some point in the next few years.

 

[Wolf359]

On average people move every 7-10 years so they never really pay off their mortgage before buying another house. People also used to refinance every 3 years too, but that will probably stop as rates have slowly inched up.

The danger of course with an 84 month loan is that the car might be worn out by the time the loan is paid off.

Mortgages are interesting in Europe, they don't do 30 year fixed over there, it's 5 years adjustable rate mortgages.

 

[StevieC]

My father inlaw is on an 84 month auto loan on his caravan because he doesn't drive a lot and is now on fixed income being retired.

He got it at 2% finance rate as well.

 

[SwampSurvivor]

Originally Posted by jeepman3071
Originally Posted by Miller88
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.



This is the issue with long term loans on newer vehicles too. 84 month loans on most vehicles means the buyer is still making payments long after the warranty is up, meaning they will be paying for repairs AND payments. With anything used or off lease the chances of this happening are greater. Not too much of an issue with your basic Camry, but with all modern cars being complex with turbos, DI, and infotainment, the repairs will be pricey. I can't imagine the repairs these people with 7 year loans on diesel trucks will be experiencing down the road. Not to mention expensive maintenance items like tires, brakes, and fuel to feed them.



While I know it's not popular here on BITOG, but it really does make the case for a lease for a simple and basic car. I strongly considered a lease when I was planning on paying cash for a brand new vehicle. Under $200 a month for a Versa or right around $200 a month for a Rogue with nothing down. As a commuter / beater. It really does come pretty close to depreciation. No repairs. No rust.


Originally Posted by supton
I can't imagine an 84 month car loan.

While ago I got curious about why mortgages were 30 years. Turns out I wasn't the only one--found an NPR (?) article about it. Turns out, after the Great Depression the government got involved to help people stay in their homes. Prior to then, mortgages were 5 year term, and interest only. During the Great Depression when people lost work and/or the bank wouldn't renew, people lost their homes.

Reason I mention that is, is an 84 month loan much more than finance charges? More like leasing with no intent to own (going to trade long before 84 months). Which I wonder about some home ownership, never going out to full term and paying off. Maybe nothing is new under the sun. Getting to the point where people never really own anything other than the clothes on their back...

All I know is that I'm bummed by this--my fleet isn't getting newer, and a nice factory backed 0% APR (or similar) would be nice to slide into at some point in the next few years.


The difference per month on a 30 year mortgage and a 20 year mortgage isn't much and the difference between 15 and 20 also isn't much. Banks are also realllllly easy about giving out extremely high mortgages. I wanted a 15 or 20 year mortgage on a $60K house, I was immediately approved for a 30 year mortgage on $140k. No ... I can almost guarantee I will be somewhere else when I'm 57.

Although, it really was tempting to spend an extra $50,000 in house and finance it for another 15 years and not have to work on the stupid house all the time.

An 84 month old vehicle up here is junk.

 

[billt460]

Originally Posted by NormanBuntz
My opinion: most but not all of these 7 million people make the major mistake of living beyond their means.

It's way more than 7 million when you add it all up. Car payments barely scratch the surface. Between lack of ANY savings, credit card debt, home mortgages, and student loans, this country is more economically fragile than most could imagine. The average family is leveraged to the hilt, and hanging by a financial thread.

 

[StevieC]

The economy is fine look away from the house of cards....

 

[PimTac]

It is also a huge roll of the dice if you take on a 84 month car loan and hopeit doesn't get wrecked. That itself will set a person back severely in a financial sense and possibly a medical sense as well.

 

[StevieC]

Originally Posted by PimTac
It is also a huge roll of the dice if you take on a 84 month car loan and hopeit doesn't get wrecked. That itself will set a person back severely in a financial sense and possibly a medical sense as well.

Your insurance doesn't pay out the remaining balance in the event of a total loss?

Mine does so long as I didn't roll in negative equity from a previous car loan. For that they have gap insurance for like $20 a month so that can get written off too in the case of a total loss.

 

[CKN]

Most on here don't understand the benefits of leasing for those who can stay within the millage requirement of said lease. They just listen to some guy on the radio who say leases are evil.........

 

[PimTac]

Originally Posted by StevieC
Originally Posted by PimTac
It is also a huge roll of the dice if you take on a 84 month car loan and hopeit doesn't get wrecked. That itself will set a person back severely in a financial sense and possibly a medical sense as well.

Your insurance doesn't pay out the remaining balance in the event of a total loss?

Mine does so long as I didn't roll in negative equity from a previous car loan. For that they have gap insurance for like $20 a month so that can get written off too in the case of a total loss.

It depends on the policy. Also Canada might have different regulations on this. A lot of people here will get in a accident and be underwater on the loan end depending how much value the car is worth. So for example on a 7 year loan you total the car at the 4 or 5 year mark. You are likely underwater.

 

[cashmoney]

It is really very simple. Wealthy people earn interest and poor people pay interest.

Wealthy people tend to stay wealthy because they are more likely to be smarter/better educated and consistently make good decisions about money and financial matters.

Poor people tend to stay poor because they are more likely to be stupid/badly educated and consistently make bad decisions about money and financial matters.

Buying flashy cars and pickup trucks/SUVs with consumer loans that they cannot afford, when they have little to no money in the bank, are just one of the many bad financial decisions that dumbazzess consistently make all across America.

You think education is expensive you should see how much ignorance costs.

 

[Elkins45]

I grew up in eastern Kentucky in coal mining territory. During the boom times every single wide trailer setting on a carved-out ledge on the hillside had a new 4x4 and a bass boat parked in the driveway. During the bust times the finance company would haul them all away, sometimes including the trailer. Sometimes the Sherriff had to facilitate that process.

Uneducated or poorly educated people make poor financial decision, spurred on by the people who profit from those bad decisions. If Billy Bob at the Ford dealer had the integrity to tell him he couldn't afford a new truck, our 19 year old coal miner would head down to the Chevy dealer where Jimmy Ray was more than happy to fill out a loan application for him.

My parents grew up during the depression and they taught me financial responsibility from a young age. My dad paid cash for his new cars and began saving for the next one just as soon as he drove the new one off the lot.

 

[stockrex]

I live in a good school district, I picked this for my children, my taxes exceed my monthly mortgage payment.

I save and buy stuff and I have stuff. Most of my neighbors like to drive European vehicles and gauge a person by their "flash",

Most of them live way above outside their means, it is not that they want to eat caviar on a beans/rice budget, it is that they look down on themselves and anyone who openly eat beans/rice.

There 2 ways to get enough in life, one is to keep accumulating and other is to want less. - Some guy with moooo brains than me.

 

[StevieC]

Originally Posted by PimTac
Originally Posted by StevieC
Originally Posted by PimTac
It is also a huge roll of the dice if you take on a 84 month car loan and hopeit doesn't get wrecked. That itself will set a person back severely in a financial sense and possibly a medical sense as well.

Your insurance doesn't pay out the remaining balance in the event of a total loss?

Mine does so long as I didn't roll in negative equity from a previous car loan. For that they have gap insurance for like $20 a month so that can get written off too in the case of a total loss.

It depends on the policy. Also Canada might have different regulations on this. A lot of people here will get in a accident and be underwater on the loan end depending how much value the car is worth. So for example on a 7 year loan you total the car at the 4 or 5 year mark. You are likely underwater.

Yeah that's what I figured and why I asked... Thanks!

That could explain some of our much higher insurance rates.

 

[SeaJay]

Sure, just about everyone outside of the major urban centers needs a car. One that is reliable and will get them from place to place.

But older cars, some with faded paint or several dents in the outer skin, and those without the latest and greatest of luxury items (connectivity to mobile device, GPS, backup camera, heated seats, lane warning devices, heated steering wheel, a/c in the seats, electric seat, etc., etc, etc) will get folks from place to place just as well as any other.
'
Late model used minivans from a certain manufacturer these days are going for a small song and a dance. But there are many folks that would cut off their right hand before being seen driving a minivan.

The result is that a lot of folks without a pot to relieve themselves in, or a window to throw it out of will end up with a newer vehicles with all the bells and whistles that they can not afford without giving up some of life's other necessities.

 

[CKN]

Originally Posted by PimTac
Originally Posted by StevieC
Originally Posted by PimTac
It is also a huge roll of the dice if you take on a 84 month car loan and hopeit doesn't get wrecked. That itself will set a person back severely in a financial sense and possibly a medical sense as well.

Your insurance doesn't pay out the remaining balance in the event of a total loss?

Mine does so long as I didn't roll in negative equity from a previous car loan. For that they have gap insurance for like $20 a month so that can get written off too in the case of a total loss.

It depends on the policy. Also Canada might have different regulations on this. A lot of people here will get in a accident and be underwater on the loan end depending how much value the car is worth. So for example on a 7 year loan you total the car at the 4 or 5 year mark. You are likely underwater.



Would like to see some real math on this verses your opinion. I would think it depends on the vehicle and the amount financed. Have you seen prices on used trucks? OR-Honda Pilots? I put down $25,000.00 on my new truck purchase. Then turned around and the credit union appraised it for $4,000.00 more than I paid for it.

 

[nthach]

Originally Posted by jeepman3071


Times have changed. I'm very fortunate that I was raised to be financially responsible and have always been a saver. I buy things I want with cash, and worked hard enough to graduate with no student debt. Most millennials I know work multiple jobs just to pay student loans and housing. If their $1200 Civic or Camry breaks down, most don't have money for repairs and either buy another $1200 Civic or buy a new one with 30 years of payments. I try to help a lot of my friends fix their cars when I can, because for many of them a $1000 repair bill is out of the question, and they need the car to commute to school and work.
I saved my friend a $120 service call on her dryer in her apartment simply by watching a youtube video on how to repair it. No doubt that strong marketing also has a huge influence on what people buy. It is all a perfect storm if you aren't careful.


I've been told by many of my friends I'm handy - some even paid me to work on their cars, and I have an agreement with an old friend - he'll drive me up to the mountains in exchange for basic maintenance on his car - oil, fluids, filters, brakes. I just gotta chip in for my share of gas as well. I'm probably younger than most here on BITOG and I admit yes, I've been wreckless with money and I'm learning how to get out of that hole. A few said why not become a mechanic, but I don't want to be a flat-rate hack at a dealership and with the quality of cars and parts these days, I'm meh about it. We live increasingly in a throw-away society. And thanks to a few here, I've learned enough to keep a car running up until(and maybe) 200K.

Originally Posted by SatinSilver
The credit subsidiary of three manufacturers are known for easy financing approvals. They are Nissan, Mitsubishi and FCA.


Don't forget Toyota as well - they've been generous with people wanting to drive for Uber. Uber is quite aggressive at getting people with bad credit or underemployment to drive for them. Mitsubishi doesn't have a "current" line up in the US, but I've been seeing Nissan dealers aggressively marketing towards subprime lenders. Hyundai to a degree as well. But more subprime shenanigans aren't from a automaker's finance arm, dealers these days are wheeling and dealing with banks and lenders specializing in subprime car notes like Santander(who is also in cahoots with Uber), Credit Acceptance and another one whose name escapes me - I used to work at the local Honda dealer 10 years ago and I would always walk by the sales and finance offices and I saw that lender's paraphernalia in the office. At the same Honda dealer, I recall the used car manager always had a healthy haul of ex-rental Calibers, Cobalts, Avengers and others from the auction. They bought those cars for people with bad credit who coudn't afford anything else. However, in the rare circumstance we had to get a car back because financing was declined, it was almost always a nicer EX-L or above Honda.

 

[Alfred_B]

Vehicle prices, together with housing, education and healthcare costs, have gone up while earnings have remained flat over the years. Without alternative means of transportation, you have to have a car so you end up with a situation like this.

 

[Elkins45]

There's a lot of stupidity in terms of what makes a ‘base' vehicle these days. Can you even buy a new car with manual locks and hand crank windows?

My first new vehicle was an 81 Toyota 4x4, and I thought I was living like a king when I drove it around. It had a 4 speed manual, no AC and no power steering. Manual locks and windows. To find a new car like that today you would probably have to go to India or Russia. For darned sure they aren't selling any in the USA. My 87 Toyota came without a radio and a right hand mirror.

My 2017 Nissan Titan has a huge LCD screen but no backup camera. It's a base model and the only extra items were a trailering package and floor mats. Do I really need power locks on a truck? No, but I have them anyway.

Cars could be a lot cheaper than they are, but who would buy them? Consumers have been trained to spread the cost of extras out over 72 months.

 

[Anduril]

Originally Posted by Elkins45
There's a lot of stupidity in terms of what makes a ‘base' vehicle these days. Can you even buy a new car with manual locks and hand crank windows?

Wife's Versa came that way. It was the only way to get a manual transmission. She liked the touch screeh and backup camera in the higher models but they only came with the piece of junk CVT, so I installed aftermarket ones for a few hundred dollars after the fact.