7 Million people are late with car payments

[Wolf359]

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.


You do realize that if people are buying gap insurance for an extra $20 over 7 years, that adds up to $1680. If you add in compound interest, they'd probably have an extra $2k after 7 years.

It's how the rich get richer by not buying something like that and the poor get poorer. There's no need for gap insurance if you put down a decent down payment and have a reasonable term.

I'd like to throw out an example of compounding. At one point I invested 2k each year into my IRA, after 7 years, guess how much was in it? I remember the number as 40k. A pretty big jump as just sticking it in a mattress would just yield 14k. Course then I got blasted by one of those inevitable downturns in the market, but it only went down to 25k.

 

[bbhero]

Originally Posted by 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.




Not everyone is a high roller like you CKN

And yes it matters what kind of vehicle it is... But PimTac is not off base with that thought in a good number of circumstances.

 

[PimTac]

Yes there may be exceptions to what I said. That can be said for pretty much everything. It would depend on what the insurance will pay in the case it is totaled. It also depends if there is another driver involved and that driver is insured. But in general I stand by it.

What is scary is applying these same loan terms to used cars. The article I linked mentions that.

 

[StevieC]

Originally Posted by Wolf359
You do realize that if people are buying gap insurance for an extra $20 over 7 years, that adds up to $1680. If you add in compound interest, they'd probably have an extra $2k after 7 years.

It's how the rich get richer by not buying something like that and the poor get poorer. There's no need for gap insurance if you put down a decent down payment and have a reasonable term.

I'd like to throw out an example of compounding. At one point I invested 2k each year into my IRA, after 7 years, guess how much was in it? I remember the number as 40k. A pretty big jump as just sticking it in a mattress would just yield 14k. Course then I got blasted by one of those inevitable downturns in the market, but it only went down to 25k.


If these people are rolling forward negative equity do you think they care? People buy based on the payments they can afford because the math of the total cost is too hard for them.

But there are special circumstances where it makes sense to do if you are getting say a 0-2% interest rate on your car loan and owe a bit a trade-in but your investments are making like 6-8% say. Then it would make sense to roll it forward if you can afford the payments and the gap insurance makes sense on top of that. It's not for everyone but I could see this being the case for small minority of folks.

 

[KrisZ]

Is there even gap insurance that would run all 7 years? My insurance would only do it for 2 years and that was it.

 

[jeepman3071]

Originally Posted by 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.



That's brand new though, and I assume you got a pretty good deal and have good credit, so you aren't paying much interest. When I handled insurance claims this was not usually the case. Many people walk in and pay MSRP on cars which in my opinion is ridiculous, then since they have poor credit get terrible finance rates. 5 years into their 84 month loan they get into an accident, total the vehicle, and owe more than their vehicle is worth. Almost daily I had to argue the value with customers because they *thought* their vehicle was worth more because of the remaining amount they owed. I'd always hear "well if you give me X amount for my car, I still owe money on a car I won't have anymore".

 

[StevieC]

Originally Posted by KrisZ
Is there even gap insurance that would run all 7 years? My insurance would only do it for 2 years and that was it.

The gap insurance has to run until you are no longer negative equity which on a domestic vehicle is typically near the end of the loan. Perhaps it's different south of the border but I know it runs that long here.

 

[KrisZ]

Originally Posted by StevieC
Originally Posted by KrisZ
Is there even gap insurance that would run all 7 years? My insurance would only do it for 2 years and that was it.

The gap insurance has to run until you are no longer negative equity which on a domestic vehicle is typically near the end of the loan. Perhaps it's different south of the border but I know it runs that long here.


Good to know, mine didn't cost anything extra, so perhaps that's why it was only good for two years. I put enough of a down payment so I was never upside down on the loan so I never asked if they had anything else that would be longer.

 

[HM12460]

You all keep on buying them new cars on credit and keep the automakers happy. I'll keep my 1995 Thunderbird.

 

[Andrew1972]

60% of Americans do not have $1000 in their bank account to cover and emergency. That is INSANITY! 7 million people seems like a relatively small number.

 

[StevieC]

Originally Posted by madRiver
60% of Americans do not have $1000 in their bank account to cover and emergency. That is INSANITY! 7 million people seems like a relatively small number.


The majority of Canadians apparently are $200 away from not being able to pay their monthly obligations according to what I heard in the news the other day. Over 1/2 have no retirement savings. We used to be a nation of savers that economized and were frugal. How quick it changed in 50 years. Welcome to the debt economy!

I'm glad I don't subscribe to that group. I wouldn't be able to sleep at night.

 

[HM12460]

Threads comparable to this often pop up from time to time, and many of you/us tend to chime in with how fiscally responsible you are and how you bought your new car with cash blah, blah, blah... Tend to see a lot of the same characters. Have any of the responder's claiming to be of superior fiscal intelligence ever considered no one here cares? Just asking.

 

[jeepman3071]

Originally Posted by HM12460
Threads comparable to this often pop up from time to time, and many of you/us tend to chime in with how fiscally responsible you are and how you bought your new car with cash blah, blah, blah... Tend to see a lot of the same characters. Have any of the responder's claiming to be of superior fiscal intelligence ever considered no one here cares? Just asking.



Well, we all know BITOG'ers are different than most "normal" people.

While some of the people on this site may be penny wise/pound foolish and drive all over town to save $2 on a quart of oil, it is important to note that most are just concerned about getting the most for their money, as in making vehicles last longer. It's well known that the most expensive purchases in a person's lifetime will be cars and a home. Most people these days seem to know very little about both, and knowledge is key to making good financial decisions.

 

[edyvw]

I opened topic, but never chimed in, was bit busy.
Anyway, interesting thing about saving is that our national debt is around 105% of GDP. All thing considered, that is actually not a lot (please no comparisons to Greece, that is absolutely different situation).
But, Japan for example runs national debt at around 220% of GDP. OK, we are doing "better." But where interesting fact is that Japanese by far have "fattest" saving accounts. They save like nuts.
I would also disagree with notion that one needs brand new car. Plenty used, good cars, whether they are Toyota, Honda, Subaru etc. I mean we argue here which is good, better, best car, but for people who just started career, student debt etc. the simpler the better, and few year old used car is better financial decision than brand new. For example, I purchased 2015 Sienna in September 2018 with 42k. I absolutely hate the car, as all of you know. It is antithesis of an vehicle. But, for what I need, and that is hauling kids, refrigerator, or in laws, it is perfect. But here is the thing, brand new, this model was $46k. Three years later with 42k was $28k. So $18k depreciation for a vehicle with 42,000 miles. In country where I am coming from they would consider that brand new vehicle where someone "barely [censored]."
So, the fact that people go after brand new vehicle so much, is appalling. Why? Latest tech? 1mpg better over latest model? I just do not get it.
There is also that educational part. I get it, 99.99999999999999% of people are not BITOGers or whatever "ers." But, few weeks bask, colleague, in 30's, called road assistance to change his flat on Outback. The guy is in 30's and he cannot change a [censored] flat tire. Forget DIY, it is [censored] flat tire! And as someone mentioned before, huge truck, that obviously never saw the rain, let alone towing, dirt etc. are simply unreachable for my brain.

 

[Garak]

Originally Posted by StevieC
The majority of Canadians apparently are $200 away from not being able to pay their monthly obligations according to what I heard in the news the other day. Over 1/2 have no retirement savings. We used to be a nation of savers that economized and were frugal. How quick it changed in 50 years. Welcome to the debt economy!

Without getting political, just look back to the 1970s and early 1980s. The States had high interest rates, and we kept ours even higher in a [vain] attempt at keeping our dollar from going down the toilet. The interest rates on car loans back then would make some current credit card companies blush.

 

[StevieC]

Originally Posted by Garak
Originally Posted by StevieC
The majority of Canadians apparently are $200 away from not being able to pay their monthly obligations according to what I heard in the news the other day. Over 1/2 have no retirement savings. We used to be a nation of savers that economized and were frugal. How quick it changed in 50 years. Welcome to the debt economy!

Without getting political, just look back to the 1970s and early 1980s. The States had high interest rates, and we kept ours even higher in a [vain] attempt at keeping our dollar from going down the toilet. The interest rates on car loans back then would make some current credit card companies blush.

Same happened here. My parents first Mortgage in the 1980's was at 21%

 

[PimTac]

Originally Posted by Garak
Originally Posted by StevieC
The majority of Canadians apparently are $200 away from not being able to pay their monthly obligations according to what I heard in the news the other day. Over 1/2 have no retirement savings. We used to be a nation of savers that economized and were frugal. How quick it changed in 50 years. Welcome to the debt economy!

Without getting political, just look back to the 1970s and early 1980s. The States had high interest rates, and we kept ours even higher in a [vain] attempt at keeping our dollar from going down the toilet. The interest rates on car loans back then would make some current credit card companies blush.





Yep, those were interesting times. Jobs were scarier than hens teeth. Inflation and high interest rates were the norm.

 

[StevieC]

We need to get back to 6-10% to curb the usage of cheap debt and the more time we spend with chronically low interest rates the longer we extended the scope of the problem and punish savers at the same time. But I think they are scared because cheap debt is really the only thing keeping the economy a float.

 

[pandus13]

Originally Posted by edyvw
...

There is also that educational part. I get it, 99.99999999999999% of people are not BITOGers or whatever "ers." But, few weeks bask, colleague, in 30's, called road assistance to change his flat on Outback. The guy is in 30's and he cannot change a [censored] flat tire. Forget DIY, it is [censored] flat tire! And as someone mentioned before, huge truck, that obviously never saw the rain, let alone towing, dirt etc. are simply unreachable for my brain.


Let's make it funnyier:
-Imagine the guy when power is down and he cannot open his garage door..... (A teenager did this in my building: disconnected the opener motor; 10 people didn't leave the common garage for the weekend......)

 

[cjcride]

Originally Posted by StevieC
We need to get back to 6-10% to curb the usage of cheap debt and the more time we spend with chronically low interest rates the longer we extended the scope of the problem and punish savers at the same time. But I think they are scared because cheap debt is really the only thing keeping the economy a float.

and keeping Canadian real estate prices where they are.