This is a good point.
When you part with a nice chunk of your hard earned, you tend to think more carefully about a purchase.
Negative equity
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When you part with a nice chunk of your hard earned, you tend to think more carefully about a purchase.
Only negative if you’re indeed to dump the vehicle. Otherwise the average person doesn’t think about it
Well, the negative equity is "real" regardless of whether or not it's realized through selling the vehicle. It's real because you never know when life circumstances will force you to sell and so the risk makes it real.
I saved my pennies for many years. I could go buy new but I've always felt there were good vehicles out there on the used market. Trick is finding them right? I say let em' spend how they want. It's how I buy their "Scraps". 
Here's this latest purchase. Look at that MSRP of $71,845!! I paid $19,500 for this 2017. Yeah it's 9 years old with 73k but so what? I should be able to squeeze 100k out of it or more. 125% more than the original owner did for 28% of the original price!!! (if they didn't finance)
Paid in cash-
It is a gamble no doubt about it though! If it was a terrible buy I'd not have the same tune...right?. That's why it does boggle the mind b/c the folks that buy new eliminate that gamble & should keep them until the wheels fall off. They are in decent shape if that were the case but we see that's not the case overall with this post.
However, some of us bottom shoppers can get good deals & if it weren't for those buyers what would we have to pick from used? We can guarantee that most folks buy on debt & when they "Upgrade" the existing one goes down to the dealer with a for sale sign for a fraction of the cost.
Here's the bucket:
https://bobistheoilguy.com/forums/threads/i-bought-a-2017-lincoln-navigator-l.406586/
Of course there are folks that have a genuine need to swap out & increase borrowing costs due to them overpaying for their existing vehicle (due to substantial price hikes over the last 6 yrs) & that is tough, all the more reason to try & find a good used bargain. Other folks that buy very high priced vehicles, can't afford them, & don't keep them until they are toast are not helping themselves that's for sure.
Here's this latest purchase. Look at that MSRP of $71,845!! I paid $19,500 for this 2017. Yeah it's 9 years old with 73k but so what? I should be able to squeeze 100k out of it or more. 125% more than the original owner did for 28% of the original price!!! (if they didn't finance)
Paid in cash-
It is a gamble no doubt about it though! If it was a terrible buy I'd not have the same tune...right?. That's why it does boggle the mind b/c the folks that buy new eliminate that gamble & should keep them until the wheels fall off. They are in decent shape if that were the case but we see that's not the case overall with this post.
However, some of us bottom shoppers can get good deals & if it weren't for those buyers what would we have to pick from used? We can guarantee that most folks buy on debt & when they "Upgrade" the existing one goes down to the dealer with a for sale sign for a fraction of the cost.
Here's the bucket:
https://bobistheoilguy.com/forums/threads/i-bought-a-2017-lincoln-navigator-l.406586/
Of course there are folks that have a genuine need to swap out & increase borrowing costs due to them overpaying for their existing vehicle (due to substantial price hikes over the last 6 yrs) & that is tough, all the more reason to try & find a good used bargain. Other folks that buy very high priced vehicles, can't afford them, & don't keep them until they are toast are not helping themselves that's for sure.
I hope they have a good GAP insurance policy...
Owen Lucas
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I see this frequently.
Totaled car -> owes more money than it's worth -> forgot to buy GAP insurance - > freaks out on me.
Totaled car -> owes more money than it's worth -> forgot to buy GAP insurance - > freaks out on me.
I used to work in a big big banks sub prime auto loan division, and based on what I saw, the only add-on product I would recommend to anyone is GAP insurance. But they aren't all the same and some have limits, so even in a negative equity situation big enough it might not cover it.
But the access to credit artificially inflates prices by creating a false demand signal. Could you imaging what would happen if people had to pay outright for everything, prices for everything would be much lower.
You're only looking at demand here. If everyone had to pay outright for everything, prices for some things would likely fall, but so would production (supply), investment, employment, and access. A $40,000 car might become cheaper, but far fewer people could buy one, and automakers would build fewer cars. The lower price would come with a much smaller market. Remember, the intersection of the supply and demand curves is by definition the price buyers are willing to buy at and sellers are willing to sell at.
I do agree with yoru premise but you make it sound so normal. The reality is that the many people in the US are financially illiterate and in massive debt. Articles like that are indicative of the actual state of the average American. It will eventually come to a screeching halt. There is only one entity that can be in the red for an excessive amount of time before the piper is paid (FYI that is our government).
Owen Lucas
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Interesting. What are some of the limits gap insurance places? Do they cover only X% over a certain value, up to the ACV? A stated $ max?
New vehicles with a loan are a double whammy because in addition to your payment, insurance is much higher and annual registration can vary by a couple thousand -- at least in CO.
On older stuff insurance and registration may only be a $200-$300 per year COMBINED -- like my '07 F150. Then again plenty of good 2000-2017 (or whatever range) vehicles here where rust isn't a concern
That said, everyone should spend their money as they choose.
Averages can be misleading. The WSJ used to be better generally. Robert Bartley probably spins in his grave several times a week with the new crew of provacateurs.
That being said, the real issue impacting the auto market is the cost of new cars. Some of that is the persistent inflation since 2020-2021. Some of it is due to government fuel economy and safety regulations that drive up cost by essentially requiring automakers to manufacture new powertrains. This is why we lose the Toyota 4.0 v6 and 5.7 and get the twin turd turbo v6. Some of it is because people simply want a level of content that is much higher than it was 30 years ago.
all that being said, frequent new car purchases have never been a good idea financially and excessive leverage relative to income can be ruinous. Nothing new to see here.
Don’t think in economics it is just as simple as saying well if you get rid of/lower this, it automatically fixes/raises that. Scarcity can also increase costs. Less opportunity (ie, jobs) might mean less supply. When people are fighting for resources prices can increase.
Weak bank regulation.
The main downside to older vehicles is safety. Yes some of the nags on newer cars are annoying but newer vehicles, especially EVs, are just so much safer than the old stuff. I'm not saying old = unsafe but generally the newer the vehicle the safer it is.
I never really thought of this stuff til about a year ago when I got in a serious wreck for the first time in my life. Now I actually consider safety to be a top aspect of choosing a vehicle vs somewhere at the bottom.
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