A record 7 million Americans are 3 months behind on their car payments, a red flag for the economy

[Jason]

https://www.washingtonpost.com/business/2019/02/12/record-million-americans-are-months-behind-their-car-payments-red-flag-economy/?utm_term=.7afb408716cd

[RedSoxFan9]

someone needs to ask Joe Biden about this

[elbobo]

average new car price in the US is $35,742

 

average median personal income is $31,099

 

gee I wonder why people can't afford cars

[PaladinSolo]

5 minutes ago, elbobo said:

average new car price in the US is $35,742

 

average median personal income is $31,099

 

gee I wonder why people can't afford cars

I'd wager its used cars that are the worst offenders here, theres some seriously fucked up buy here pay here practices, you can literally pay more than twice as much as what a car is worth at those places, but people do it cause their credit is shit.  Can't make a payment?  They'll make your car unable to start, long enough they'll repo it back and sell it again. 

[RedSoxFan9]

It’s a good thing Americans can survive without cars

[Commissar SFLUFAN]

Who in their right mind buys a "new" car?!?

[CitizenVectron]

1 minute ago, SFLUFAN said:

Who in their right mind buys a "new" car?!?

 

Much in the same way some of us build new computers with top-end parts, some people find utility in owning new cars so they can have the newest features (including safety) and not have to worry about breaking down (warranty). I agree that it's a bad financial decision, however. In a perfect world everyone would be buying 3-year-old Honda Civics and Toyota Corollas that they paid for in cash.

[Jason]

Just now, CitizenVectron said:

 

Much in the same way some of us build new computers with top-end parts, some people find utility in owning new cars so they can have the newest features (including safety) and not have to worry about breaking down (warranty). I agree that it's a bad financial decision, however. In a perfect world everyone would be buying 3-year-old Honda Civics and Toyota Corollas that they paid for in cash.

 

Someone has to keep buying new cars to make those 3 year old Civics/Corollas available and affordable.

[Commissar SFLUFAN]

4 minutes ago, CitizenVectron said:

 

Much in the same way some of us build new computers with top-end parts, some people find utility in owning new cars so they can have the newest features (including safety) and not have to worry about breaking down (warranty). I agree that it's a bad financial decision, however. In a perfect world everyone would be buying 3-year-old Honda Civics and Toyota Corollas that they paid for in cash.

The immediate "drive off the lot" depreciation for a new car makes it a bad financial decision.

[Guest]

There are many intangibles about newness that people like and the auto dealers use to convince people to keep trading in for something newer.

[Chris-]

Just now, SFLUFAN said:

The immediate "drive off the lot" depreciation for a new car makes it a bad financial decision.

 

That happens to every car though. At least with a new car, the equity will be higher when you ultimately sell it or trade it in (since it will be newer then buying something that was already 2-3 years old).

[marioandsonic]

Sounds like we need to give millionaires another tax cut!

[Firewithin]

Maybe they could afford their cars if they didn't have to keep investing in new bootstraps 

[b_m_b_m_b_m]

18 minutes ago, RedSoxFan9 said:

It’s a good thing Americans can survive without cars

Every time I see the price of a new car, this thought goes through my head. And we keep doubling down on car based infrastructure. 

 

(slightly unrelated, but this is part of the reason why a carbon tax on its own will just breed resentment. Alternatives to car ownership need to happen and that will take investment)

[Amazatron]

9 minutes ago, Chris- said:

 

That happens to every car though. At least with a new car, the equity will be higher when you ultimately sell it or trade it in (since it will be newer then buying something that was already 2-3 years old).

 

Yeah, but you paid 30-40% more for the new car.  Strictly from a financial position, buying used is always better.

[SimpleG]

12 minutes ago, SFLUFAN said:

Who in their right mind buys a "new" car?!?

I travel quite a bit for work and sometimes for weeks on end Ill be gone. My wife new car came with a 10y/100,000 mile warranty that covers tows and loaner cars if there is an issue. The car was paid off in 3 years and under 40k miles. It had an issue 1 time while I was out of town, the dealership picked my wife up and dropped her off at her work, while she was there they dropped of a loaner car for her to use for 2 days until it was fixed. If there is an issue I dont have to worry to they are scamming me because I dont pay shit,they take care of everything. 

 

 

[Chris-]

15 minutes ago, Amazatron said:

 

Yeah, but you paid 30-40% more for the new car.  Strictly from a financial position, buying used is always better.

 

Within the same model that may be true, but people tend to look across models when shopping for a car because their primary concern is price; right now a 2019 Corolla is roughly in the same price range as a 2016 Avalon. If you know the exact model you want then yeah, buying used is unquestionably better. But most people don't shop for cars that way. Assuming a 48 month loan, a four-year old Corolla will be worth more than a seven-year old Avalon (though I'm not a car person, so maybe I'm wrong).

[Chairslinger]

28 minutes ago, marioandsonic said:

Sounds like we need to give millionaires another tax cut!

 

 

Is that you, Mr. Snrub?

 

 

Spoiler

 

[CitizenVectron]

28 minutes ago, SimpleG said:

I travel quite a bit for work and sometimes for weeks on end Ill be gone. My wife new car came with a 10y/100,000 mile warranty that covers tows and loaner cars if there is an issue. The car was paid off in 3 years and under 40k miles. It had an issue 1 time while I was out of town, the dealership picked my wife up and dropped her off at her work, while she was there they dropped of a loaner car for her to use for 2 days until it was fixed. If there is an issue I dont have to worry to they are scamming me because I dont pay shit,they take care of everything. 

 

 

 

 

While this is a nice benefit, the same thing can be purchased from AAA for a significantly reduced price (compared to the premium on a new car). The one thing that a new car can provide, however, is peace of mind. If that's worth the extra price for someone, then that's up to them.

[Amazatron]

18 minutes ago, Chris- said:

 

Within the same model that may be true, but people tend to look across models when shopping for a car because their primary concern is price; right now a 2019 Corolla is roughly in the same price range as a 2016 Avalon. If you know the exact model you want then yeah, buying used is unquestionably better. But most people don't shop for cars that way. Assuming a 48 month loan, a four-year old Corolla will be worth more than a seven-year old Avalon (though I'm not a car person, so maybe I'm wrong).

 

Ok, but if their primary concern is price, then a 2016 Corolla beats both of them on price quite easily.

[SimpleG]

8 minutes ago, CitizenVectron said:

 

 

While this is a nice benefit, the same thing can be purchased from AAA for a significantly reduced price (compared to the premium on a new car). The one thing that a new car can provide, however, is peace of mind. If that's worth the extra price for someone, then that's up to them.

AAA can do  the ride and loaner car but they dont take care of the bill ,its one stop shop that does everything,as you said iam paying for peace of mind and I am fine with that.

[PaladinSolo]

Factory warranties transfer owners, just saying.

[Anathema-]

I bought new because with year end clearance savings a new focus was actually cheaper listed than the used/couple year old ones I was looking at. The warranty made it worth it and one replaced starter and front axle later I've probably already made up for half of the warranty cost. Not having to pay for towing or a loaner has been incredibly helpful too. 

 

Edit: it was a 18ish-k vehicle with 4k off. Used ones were going for like 15-16k.

[Guest]

6 minutes ago, Anathema- said:

I bought new because with year end clearance savings a new focus was actually cheaper listed than the used/couple year old ones I was looking at. The warranty made it worth it and one replaced starter and front axle later I've probably already made up for half of the warranty cost. Not having to pay for towing or a loaner has been incredibly helpful too. 

 

There are also often financing deals in place for new purchases that are better than what you can get from a bank on a used car because the manufacturers and/or dealers buy down the rate a bit.

[CastlevaniaNut18]

I bought my truck new in 2013. I qualified for 0% interest financing from the dealership and paid it off in three years. I still driving it and I'm not quite at 32,000 miles.

 

Can't say I have any regrets about buying new.

[Ghost_MH]

41 minutes ago, sblfilms said:

 

There are also often financing deals in place for new purchases that are better than what you can get from a bank on a used car because the manufacturers and/or dealers buy down the rate a bit.

 

I'm sure many of those great financing deals are available to people with good credit. There are, at least, 7 million Americans here not eligible for favorable financing or even enough financing to afford them a new car without a significant down payment they may not have the money for.

[Guest]

2 minutes ago, Ghost_MH said:

 

I'm sure many of those great financing deals are available to people with good credit. There are, at least, 7 million Americans here not eligible for favorable financing or even enough financing to afford them a new car without a significant down payment they may not have the money for.

 

This is true AND has literally nothing to do with our discussion of why somebody might buy a new car instead of a used one though

[Joe]

1 hour ago, sblfilms said:

 

There are also often financing deals in place for new purchases that are better than what you can get from a bank on a used car because the manufacturers and/or dealers buy down the rate a bit.

 

Even with a little bit of interest, buying used would still be better, I think.

[Guest]

2 minutes ago, Jose said:

 

Even with a little bit of interest, buying used would still be better, I think.

If bottom line price is your metric, this is almost always correct. But a couple of percentage points is about 5% of the sales price on a 60 month term, so it is something that narrows the gap a bit.

[Chris-]

5 hours ago, Amazatron said:

 

Ok, but if their primary concern is price, then a 2016 Corolla beats both of them on price quite easily.

 

Right, but that ignores a whole host of other factors. Your original point - that used is always better strictly from a financial position - isn't necessarily wrong, but it's not congruent with how people buy cars. Case in point, why buy a 2016 Corolla when the 2014 is cheaper and the 2010 is even cheaper and so on. Quality, convenience, and future value all matter. If you've already established the range you are working with prior to getting on the lot, buying new within that range is worth it if those factors are better satisfied. 

[elbobo]

percentage-wise these numbers actually aren't all that high it turns out. Outside of young people most groups appear to be the same as they were prerecession. 

 

 

 

[marioandsonic]

38 minutes ago, elbobo said:

percentage-wise these numbers actually aren't all that high it turns out. Outside of young people most groups appear to be the same as they were prerecession. 

 

 

 

I'm sure that has to do with young people dealing with increasingly high student loans.

[CitizenVectron]

14 hours ago, sblfilms said:

If bottom line price is your metric, this is almost always correct. But a couple of percentage points is about 5% of the sales price on a 60 month term, so it is something that narrows the gap a bit.

 

The idea with buying a 2-3 year-old Honda/Toyota is that you buy it with either cash or a bank loan, and then sell it after 2-3 years, repeating with a different car. Basically you buy it in the sweet-spot of its life and then sell it before the depreciation bottoms out. The best scenario is:

• Buy car with cash
• Make payments to yourself each month, deposit into high-interest savings account (2-3%)
• After 2-3 years, use cash to get new used car
• Sell old car
• Repeat

It's a self-supporting cycle, with the hardest part being the initial cash purchase. The best way to accumulate enough cash the first time around is to keep a car much longer than you'd want, and pay yourself the car payments after you've paid it off until you've saved enough.

 

[b_m_b_m_b_m]

Lol where are you getting 2-3% interest? The First National Bank of Narnia?

[brucoe]

19 hours ago, SFLUFAN said:

Who in their right mind buys a "new" car?!?

I did, but it can easily be argued that I'm never in my right mind.

 

On the real subject, I bought a Honda Insight brand new because it was the first year in some time that the car was being offered that was also a hybrid (the only type of car I buy these days). I really love my car, and I would have bought it used if it had been available as such.