7 Million people are late with car payments

[PandaBear]

When manufacturers have to dump a bunch of vehicles without tanking their prices, they have to give huge incentive in financing, or, target the subprime market.

So, they finance for a super long time, take on excessive risks, and someone will bite.

When you are a subprime customer with bad credit and low income, you are going to either take on a car that you know is over priced (interest, not just the retail price) and on the hook for its questionable reliability, and someone offer you a deal that you can default on, which one would you choose?

Remember, your credit is bad already, so your choice is either a worn out Hyundai Santa Fe with bad everything, for $400 a month payment, or a new car for $300 a month with a warranty. Either case is just a predatory loan, either case is just a month to month rental in disguise.

Which one would you pick? Who is the stupid one subsidizing and playing in the subprime market?

More importantly, why? Because it is just a way to work around some inventory dumping, a way to postpone the financial write off until a few years later.

 

[dave1251]

Everyone IMO posting here should be more concern on the nearly 40% of student loans about to go into default

 

[JustN89]

I'm not sure if this was discussed in the previous 9 pages, but another factor that plays in to a record number of people behind on payments is the drastic increase in total car loans.

According to this website, in 2017 a total of 108 million car loans were being paid on. Compare that to 2003, a year in which there were 74 million active car loan accounts. That's a nearly 46% change over 14 years. I can't find any data for the percent of people behind on car payments in the early 2000s, but today that 7 million people late on car payments reflects just 6% of active accounts. I can't imagine it's that much higher than before. While it's a startling number to see (7 million is a lot), I'd hazard a guess that it's probably in line percentage-wise with previous years.

 

[jeepman3071]

Originally Posted by JustN89
I'm not sure if this was discussed in the previous 9 pages, but another factor that plays in to a record number of people behind on payments is the drastic increase in total car loans.

According to this website, in 2017 a total of 108 million car loans were being paid on. Compare that to 2003, a year in which there were 74 million active car loan accounts. That's a nearly 46% change over 14 years. I can't find any data for the percent of people behind on car payments in the early 2000s, but today that 7 million people late on car payments reflects just 6% of active accounts. I can't imagine it's that much higher than before. While it's a startling number to see (7 million is a lot), I'd hazard a guess that it's probably in line percentage-wise with previous years.


Also what do they define as late? Is late barely missing a payment or not paying 2 or 3 times? If the car is repossessed does this exclude them from the list?

 

[grampi]

Doesn't surprise me...judging by all the high dollar vehicles I see on the roads these days, a lot of people have mortgage sized car payments...

 

[nthach]

Originally Posted by dave1251
Everyone IMO posting here should be more concern on the nearly 40% of student loans about to go into default

I know a few people who defaulted on their loans. That will carry more weight on them than a car note or a credit card. Student loan debt can't be discharged via bankruptcy.

 

[PandaBear]

Originally Posted by nthach
I know a few people who defaulted on their loans. That will carry more weight on them than a car note or a credit card. Student loan debt can't be discharged via bankruptcy.


That means nothing if they have no money to pay. I'd not be surprised many would end up doing work that pays cash or gig, so you cannot garnish their wages. If they don't already own assets what are you really going to do? You can't take away their cars and even if you can they are not worth much.

Eventually the loans will sell for half, then half again, and half again, until it is enough that they can settle.


That's the saying like "when you owe the bank $100M, it is the bank's problem".