Americans Are Taking Out Ridiculously Long Auto Loans

[Revelate]

I still have to SMH on people complaining about 6.9% auto loans Dinosaur .

I was at 19.35% on basically the day I found the forums.

I think the root problem is people just don’t really look hard at their finances. Ain’t nothing wrong with a 0% loan at some long length, or even my current I think 3.85% loan at 72 months: it’s about understanding what you can afford. In my case I did pay off a non-trivial amount early but even that was arguably a mistake: even with all the market turmoil it is still up over 20% for me this year.

3.85% ain’t a big deal to let hang out as a result, but I wasn’t squeezing my very last disposable dollar on the vehicle either: I knew what I could afford.

For all that I have yet to wash it yet in the year I have owned it... also SMH on that too haha. Not getting sorted this weekend.

[redpat]

Yes but.........DW purchased a off year new ford suv, great deal and 72 months 0%.  When then sales rep asked if she wanted to pay the sales tax to keep her payment lower, she laughed and said "I don't care what my monthly payment is and why would I pay the sales tax when it's 0%, roll everything into it".

[Brian_Earl_Spilner]

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@Guyatthebeach wrote:

I have to say I'm guilty of this because I financed my car for 66 months to lower my debt ratio at the time. I was still in the rebuilding stage after my bankruptcy. Now I did make double payments for the first 6 months of my loan to make up for it and still pay more than the amount due on my monthly payment. 

I think the main reason this happens is people just don't understand their finances and buy with their heart not their head. 

Guyatthebeach

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The main thing I hear from people is, "if I'm going to be paying for a car for 6 years, I'm going to buy what I want." They only drop down in price if they can't be approved for what they want or can't afford the payments. If the dealership or bank can lower the payments by extending the term, they'll take it to get the car they want.

[Anonymous]

Maybe it's because they want to live in a nice car when they become homeless? 

Old saying that would keep anyone within budget is the 1\10th rule. Don't spend more than 10% of your income on a vehicle. If you make 100k a year, you can buy a 10,000$ car. No one will, but think about it, something is only worth what people are willing to pay. It's why you see such deep discounts on new vehicles at years end. They aren't losing money on those,  they're getting closer to what they're actually worth. 

I work on cars p\t and can  tell you, none of them are worth even half what their sticker prices were. 

Really, what are you getting? Some metal put together mostly by a machine wrapped in some tech and a bunch of plastic.  Remember how car manufacturers claimed high prices were because of legacy costs and unions?  Then they got out of most of that through BK and what did prices do? Skyrocketed! If anyone thinks a new Expedition is worth 70k, they got one to sell ya! 

I have no sympathy for auto manufacturers, they're a scam, nor do I have any for financial institutions when regular working people file BK on them, they sure got their bailout and WE all paid for it. Put your money into your home and yourself, best investments out there, drive a $5000 Civic or Corolla, you'll end up very comfortable!

Maybe, if one has to look at a 72 month car loan, and might only have a couple hundred left at the end of the month, they just can't afford it. Unless they can deduct it, maybe it makes no sense.

[jamie123]

I sold cars for a while many years ago and learned one thing. People are stupid! I can't believe how many people would regularly put their financial future at risk to buy more car than they could really afford. The auto dealers and finance guys could care less. As long as they could get them financed it was a done deal. So what if they couldn't put food on the table for their kids if anything caused them to miss a paycheck.

EDIT: I put my $100 pre-order in on a Tesla Cybertruck one hour after they unveiled it. It will be a cash purchase unless I can recieve a really good rate on a 60 month loan 2 years from now. I have the money to pay cash but if left invested I should be able to make well over 5%.

[Anonymous]

The first car I financed had 28% interest. I shudder to think how much I overpaid on that car. It was a fairly crappy car but I was desperate and broke and knew nothing about finances. 

Thankfully, I learned my lesson. Never. Again.

[Anonymous]

You know it's a double edged sword really. Having bad credit is supposed to, to some extent, keep you out of larger debt. But it often winds up getting you further into it with horrible rates by predatory Lenders.

On the flip side if lower scores didn't get worse rates, anyone get get a loan with great rates. Further allowing them to get into debt they cannot afford. 

However, good credit and having money aren't always cut and dried as some people like to think. Just by visiting here I've discovered there are a lot of people in the upper Income bracket with very low scores. While the same time lower income with relatively high scores. 

I wonder where the breaking point is on who is more qualified for a Loan, the low income earner with perfect credit. Or the high income earner with a much lower score. Score determines rate, but DTI determines the ablity to repay it. Of course it all depends on the amount the individual is seeking to borrow. 

[Revelate]

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@jamie123 wrote:

I sold cars for a while many years ago and learned one thing. People are stupid! I can't believe how many people would regularly put their financial future at risk to buy more car than they could really afford. The auto dealers and finance guys could care less. As long as they could get them financed it was a done deal. So what if they couldn't put food on the table for their kids if anything caused them to miss a paycheck.

EDIT: I put my $100 pre-order in on a Tesla Cybertruck one hour after they unveiled it. It will be a cash purchase unless I can recieve a really good rate on a 60 month loan 2 years from now. I have the money to pay cash but if left invested I should be able to make well over 5%.

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I suspect you'll be fine on that financing plan.

Given when I financed through one of Tesla's lending partners I snagged 3.85% and my HELOC has dropped .75 since then and with things being as twisted as they are and nobody can really predict what either the economy or the market is going to be a year from now at this rate with much accuracy I suspect rates are going to be similar to what I got mine at even if everything comes up aces over the next two years for the economy which seems unlikely given the global economy is still flat to down and there's no room for many central banks to maneuver.  

December 1 DCU rate change for their HELOC product:

FLX CHG / OLD RATE=4.750 NEW RATE=4.500

= winning for current financing, I'm getting seriously tempted once this glut of mortgage apps clears and refinance numbers come in line with purchase loans (they're artificially higher right now as deterrent pricing), refinance to a 30 year fixed on the current condo and just let it ride.

[iced]

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@CreditInspired wrote:

A Wall Street Journal report says that 1/3 of all new vehicle loans are longer than 6 years...and that 7M people are at least 90 days behind on their payments. 

So Alex, I'll take, "Whose fault is it for $1K?"

(So is the fault with the lenders or people who are living beyond their means--or both?)

https://www.msn.com/en-us/autos/news/americans-are-taking-out-ridiculously-long-auto-loans/ar-AAIbIs...!

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I’m quite late to this one, but I’ll say “Who is the buyer, always.”

Caveat Emptor. Say it with me...Caveat Emptor.

Do banks try to entice people into bad deals with the lure of owning something beyond their means, at a monthly cost that seems attainable? Yes. Are people dumb enough to say yes? Yes, and this is why they’re at fault. Be it a crappy auto loan, time share, or scam, the buyer is always the final say, so if that deal happens it’s always the buyer’s fault.

I dream of a society that stops blaming others for their own failures and accepts that they were simply too stupid to say no sometimes.

[Save-n-Invest]

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@GApeachy wrote:

Those of us (ME!)  that got bit in the tailpipe by recession love our old beaters; hoopties, and '95 jeep wrangler....they ain't got a pymt or appeal. But it's funny, when I go looking at cars/trucks/work vehicles to price, no one rushes out to assist me either.  I just LOVE that; before I'd go to pull up to a car in my Escalade; couldn't get out would have to hop back in real quick and drive to the other side of the parking lot and back and forth just to look at the prices before someone could hollar me down and throw a pitch at me.  An hour long pitch at that!

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Years ago we were invited to a cocktail reception by the local Rolls-Royce dealer. People were dressed to the nines. Waiters were serving champagne and appetizers. Dealership staff were falling all over the well dressed guests. It wouldn't surprise me if a significant portion of them were afraid to park for the reop man.  

A gentleman entered via a rear entrance. He was wearing a T -shirt, jeans and sneaks. Dealership folks acted as if he was furniture. One salesperson noticed him and apporached to welcome him and answer any questions he may have. The casually dressed gent made an appointment with the salesman for the next day and left. 

At that appointment he ordered two Rollers. One for him and one for his wife. Any salesperson who qualifies a prospect by clothing only doesn't deserve your business.