Record number of car buyers underwater on their trades; loan lengths increasing

[MetroMPG]

Neither have I, but then again, I've rarely owned a car that didn't qualify as a "jalopy" by Click & Clack's standards:

"When lending your vehicle to someone else, if you have to explain some quirk about how to operate it, it's a jalopy!"

[jamesqf]

Originally Posted by MetroMPG

When lending your vehicle to someone else, if you have to explain some quirk about how to operate it, it's a jalopy!"

I think a lot of new cars might qualify as jalopies by that criterion. E.g. the ones where you have to push a button to start/stop the engine, instead of using the key in a normal fashion.

[MetroMPG]

Timely:

Moody's says it expects U.S. new vehicle sales to decline slightly to 17.4 million units in 2017.

In its view, that would mean lenders will be chasing fewer loans, "which could cause them to further loosen loan terms and loan to value criteria."

Plateau in U.S. auto sales heightens risk for lenders: Moody's | Reuters

[freebeard]

According to the NADA guides mid-book on my make year and model was $6650 two years ago when I totaled it. I was able to preserve the title with $800 additional out of pocket, and it's currently at $7800.

Fragile and valuable is a bad combination for a daily driver.

[oldtamiyaphile]

The real issue is that when you buy on finance, you still have to pay the whole (or a good deal of) the interest even if you sell immediately. That tends to roll payments into the next purchase.

On the other hand think you guys might change your tune when the reliable and relatively simple to repair 90's-2000's cars dry up.

The smallest issues can set you back thousands on the latest cars. Try pricing things like an ABS pump, body computer, diesel fuel pump/injectors.

The paradigm is shifting such that buying new is becoming the better option than taking the risk on used. I'm kind of hoping that I've bought my last new car though...(seven registered at present count)

I just bought a Proton (Mitsu Lancer) it's a 2010 model, but the tech is circa 1994. In many ways that's the way to go a lateish model, so decent paint and interior, but mechanically so simple and cheap, but still with the basic good parts of newer cars like EFI and CAT. I guess I wouldn't mind a single airbag though, and ABS.

It's a shame the powers that be won't let us have such vehicles nowadays. On our market, there was little else so outdated in 2010.

[oil pan 4]

One of my friends barrowed $16,000 at 17% for a new camery a year ago.
After a year of paying $330 a month she has paid off exactly $155 of principal.

I could go to the bank, buy her car get the title and have her pay me back plus 1,000 to 2,000 dollars.
Then in effect becoming the bank.
(Insert maniacal laughter)
I should be a bank, I figure if someone is going to take peoples money it might as well be me.

[vskid3]

Originally Posted by oldtamiyaphile

The real issue is that when you buy on finance, you still have to pay the whole (or a good deal of) the interest even if you sell immediately.

Maybe it's different down there, but in the US, I believe that's not the norm. I've paid off several loans for used cars early and the only extra charge over the remaining principal is the interest accrued since the last payment.

Let's not forget that buying a new car and financing a car are two separate issues that can compound on each other, but neither is necessarily a terrible decision. With a low enough interest rate and a responsible individual, financing can actually save/make money over paying with cash, provided that cash is invested instead. Some models depreciate so slowly that it can make sense to buy new over a 2 or 3 year old used specimen (I almost did this when I was strongly considering a Honda Fit 5-6 years ago). Of course, most people make choices that put buying new, financing, or both, firmly in the terrible decision box.

I am thankful for those who buy new cars that I'll eventually want, without them I wouldn't have used options that are a fraction of the price of new. I just wish more of them would buy cars I'm interested in so I could have a bigger selection.

[MetroMPG]

Also contributing to the problem: Many people buy new who probably should buy used, but automaker financing is easier to get than financing for a 5 year old car. (At least that's what I keep reading.)

Unfortunately, most people don't have the funds available to buy the used car outright with cash.

[MetroMPG]

In completely unrelated news...

Deep subprime becomes norm in car loan market, analysts say

Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jeen Ng said in a report dated March 24.

http://www.autonews.com/article/2017...t-analysts-say

[jamesqf]

Originally Posted by MetroMPG

Unfortunately, most people don't have the funds available to buy the used car outright with cash.

Seems like there's a lot of chicken & egg going on here. People don't have the cash available since they can't save anything because they're stuck with car payments.

In completely unrelated news...

So we had the subprime housing market crash, recovered from that, now we can look forward to the subprime auto loan crash. Really, sometimes I don't know whether to laugh, cry, run down the road screaming, or find an isolated cabin in the wilderness and wait for the bang.