Kense

I know most people here are rich or what not but the overwhelming majority of Americans cannot afford $700 a month car payments. If you're getting a 48 Month loan on a 30K car you're looking at payments in the low 700's. People want that stretched to something they can afford. You're not getting anything decent these days under 30K new. Even a civic will cost you close to 30K.

SW17LS

What you're saying doesn't have anything to do with rates of default. A loan is in default when the borrower stops performing, has nothing to do with "how hard it is or is not to repossess a car". What you're saying is akin to saying "rates of cancer diagnosis are down because its really hard to treat", which makes equally little sense. The diagnosis and the treatment are different. Rate of default and rate of repossession are different. Most people who find themselves in default never have their vehicles repossessed, they cure the default somehow before that happens. Same with home loan defaults vs foreclosure.

In reality, its way easier to repossess a car than it is to foreclose on a home, but home loan defaults are much higher than car loan defaults.

mjeds

it's not about being "rich" , it's about being money smart.. while it may be true for some here, personally I am not "rich" by any definition, I live well below my means and have no debt because I learned how to save and how to live off 50% or less of my income. Yeah my car payment was $800 a month for 36 months, which is 2/3s of one weeks net pay for me, but when you have zero debt, it isn't an issue, do the math, that is a net income of $65K a year, hardly "rich". I saved for 15 years to buy my house, and put 80% down on it... it's about being financially smart and not spending money you do not have..

To many "credit" equates to income, they use credit cards as it if was additional income.. It is one of the reasons this country has a $20 Trillion debt, yeah great Obama cut the deficit during his tenure, but he inflated the debt by using credit to balance out the budget.

you can't offset your budget deficit (personal or otherwise) by using credit to make up the difference, because now you have additional debt trying to balance your previous debt.. Sadly this is a concept the majority of Americans just do not understand..

Kense

I'm not sure where in California you are but it's not really possible in the Bay Area to do what you did. The Average 4 bedroom home in my city is close to a million dollars. So saving 750K in 15 years is not possible when you have to live at the same time. Theoretically if you have to take out a loan for a car you can't "afford" it.

SW17LS

My cousin bought a really nice Civic for $21k, not base, not loaded no. Everything doesn't *have* to be loaded, and you certainly can buy a good car for less than $30k.

Money is so cheap, the issue with long finance terms really isn't cost, its risk. As cars become more reliable that risk is mitigated to a large degree. I always say that somebody shouldn't be making payments on a car that could presumably cost them a bunch of money in repairs. Thats why I am not a fan of really long finance terms for cars. If you're somebody who puts 20k miles a year on a car, by the time its 5 years old it has 100k miles on it. So, you have car with 100k miles on it that you still have 2 YEARS of payments left to make. A modern car at 100k is a lot more reliable and has a lot more life left than a car did that was made 25 years ago, but still.

Personally I think people financing for 7 years may as well just lease. You're always going to have a payment anyways, because the car is used up by the time its paid for, you may as well have a similar payment (lease payments are +/- typically similar to 72 month payments, a little less) and you'll never have a car that will require expensive repairs.

IMHO, if you're going to BUY a car, I would not extend the payments any more than 60 months.

You could move. I'm really not kidding, the SF bay area is crazy, you would likely have a much higher quality of life someplace else.

mmarshall

Yes, I know that...but I was simply trying to illustrate what happens when a dealer, finance company, or bank does decide to move for a repo. Most companies would probably not have the resources to deal with large numbers of defaults anyway. And that's one reason why I never buy a car (including this Lacrosse) that I can't simply write a check for and get it over with.

Speaking of car loans (though I assume you will probably either lease or pay cash like I do)...have you decided on the Odyssey-vs.-Pacifica-vs.-Sienna yet?

wasjr

Many don't even negotiate vehicle price, just the payment amount.
I went with a buddy a couple of weeks ago to pick up his new Honda Ridgeline. While waiting, I heard a couple trading in a 2015 Honda on a 2017 Honda, and they never talked price or trade, just new payment amount. They were happy that they could get in a new car for "just $25 more a month." Folks don't care about the length of the note....just the payment amount.

Quote from June 2017 article: Auto loan delinquencies rose more than any other category in last year's fourth quarter, according to the most recent data from the American Bankers Association. The ABA's Consumer Credit Delinquency Bulletin tracks 11 loan categories, including home equity lines of credit, auto loans and credit cards. The report defines a delinquency as a payment that's 30 days or more overdue. Leasing or loans now finance nearly 90 percent of retail car sales in the U.S., according to global asset manager Standard Life Investments. Altogether, more than 33 percent of American households are making car payments, according to a separate Pew Charitable Trusts study, with over $1 trillion in auto loans now outstanding. Still, there is little reason for alarm, some experts say. For starters, overall delinquency rates — including credit cards, auto loans and mortgages — are at very low levels by historical standards. "Even with recent increases, auto delinquencies have remained remarkably low for the last five years amid booming car sales," James Chessen, ABA's chief economist, said in a statement. In addition, car loans make up only a small portion of total household debt, said Jeremy Lawson, Standard Life Investments' chief economist. (Less than 10 percent, in fact, according to the Federal Reserve Bank of New York).

bitkahuna

iTrader: (20)

perhaps the problem is the $100 cell bill, plus the $200 home internet/cable bill, plus the $300-$700 healthcare premium (thanks obama), plus huge taxation in california, plus more expensive gas there than anywhere except hawaii, plus... pretty soon you're talking a lot of money.

and who said one's first home would be an average 4 bedroom one in the bay area. yeah... that area is one of the most expensive in the nation, so you might have to set your sights much lower, or move and buying something elsewhere. my first home was $95k in a not very interesting distant suburb of philly... but that was 30 years ago of course. but still, think yourself lucky, the first mortgage i got to buy that home was 13% interest plus pmi (private mortgage insurance) because i could only put 5% down. i think my payment with escrowed tax and interest was about $1300. but i did it. plus i had an acura legend. and i wasn't making big bucks.

SW17LS

But that doesn't have anything to do with rate of car loan defaults. Dealers also don't repossess cars, banks and finance companies do. And why would banks having high expenses when loans are in default keep you, a consumer from taking out a loan? You aren't a bank. What you're saying just doesn't make any logical sense.

Its probably going to be the Pacifica.

mjeds

I live in L.A., I know the Bay Area is like NYC, and frankly I would not live in an area like that unless I made a 7 figure income, any more than I would live in NYC. I choose to live comfortably within my means, not struggle to put food on the table. My house was 1/4 of the price a house of the same lot size and sq. footage in the Bay Area.

Kense

Yeah, the problem is most people just don't want a car to get to point A to B. They want something nice, if you're going to pay thousands people want to get something they enjoy. When you start talking more entry level luxury/luxury cars most people cannot afford them so they will either lease or finance longer. Otherwise everybody would be driving pre owned beaters. I could move but My wife and myself have good career's here moving somewhere else is not an option, looking for another job, schools etc. We have 2 kids as well, we make in the 6 figures but feel middle class but we are not struggling. We just don't have a lot of extra money left over.

SW17LS

His Civic is not a "beater", or a car to "just get from point A to B", its a stylish, fun to drive, well optioned car that he loves...and its a car he can comfortably afford on a reasonable finance term.

I'm hearing a lot of "they want", "I want". You can't always have what you want...thats life. There are things I would like to have too that I cannot afford. If money were no object even I would drive a more expensive car, I would have a better house, I would have a boat, I would have a beach house, I'd take a ton more vacations than I do, I'd have lots of swanky new stuff. Unless you're fabulously wealthy there will ALWAYS be something you want that you can't afford. There is ALWAYS a better car, a better house, a better life and if you live your life looking at the things you want but can't have, instead of enjoying what you do and can have...you will always be poor and you will always be miserable. Whatever you buy will never be enough.

If I wanted to I could go out and buy an S550, and a Range Rover for my wife to drive, and buy a $1.3M house, and a $600k place at the beach, I could buy a $150,000 boat, pay all the expenses for that...I could physically pay for all of those things...but I would have nothing left. That would be incredibly stupid, and ultimately it would cause me great hardship and stress, not bring me joy.

Fact is, not everybody CAN drive luxury cars...not everybody SHOULD buy them. If you're somebody who sees things in your life you want but can't comfortably afford, you should direct your energy into assessing how you might be able to achieve the ability to comfortably afford those things vs going out and taking the easy way and buying them on terms that are going to hurt you financially. Can you save? Can you cut back in other areas of your life? Can you get a better job? Start a business? Go back to school?

And I'm not one of these "pay cash" or "only finance for 3 years" or "buy used cars" guys, I lease new cars, I spend a LOT on cars...but I think this trend of financing cars for longer and longer is a really bad idea...

You feel middle class because you are middle class, as opposed to feeling like you should be some upper class buy whatever you want type person, just embrace what you have instead of trying to live some life you can't afford. I feel you, I have two kids too and they're expensive...but making sacrifices is just part of life. Perhaps you would feel less stressed if you had a $21k Civic like my cousin, I'm not joking...having big monthly fixed costs is really stressful...trust me I have a lot of them myself. Problem with our society is everybody wants a 1% lifestyle. Well...99% of people can't have that...by definition.

They have a small house, one car payment, one paid off car. I make what he makes in a year in a month, and sometimes his life looks a lot happier than mine.

Kense

Going crazy buying a ton of luxury items Isn't' the same as stretching out a car payment an extra year or two. Of course there's always something "better" but there's also top of what you are willing to budget for. Yes I could get a cheaper car and save that extra few hundred a month for other things but I like cars, somebody would rather buy a cheaper car and spend on clothes or furniture. Who knows, I just know what I like and I'm willing to spend a little more on it. I think that's the mentality of a lot of people. Could I go out and buy an C63 AMG, yes, I could, but I'd be at the very top of my budget and have nothing left over. So I get something cheaper that I still like and have no regrets, but that something "Cheaper" is still considered a lot of money and a waste to most people. We make over $300K combined, so If I tell somebody we are "middle class" they would get offended. Hell I don't even know what is considered Middle class in this area anymore. I guess anything under $500K?

SW17LS

Like I said, its all about risk. You're going to owe more on the car than its worth with that long finance term for the majority of the term. When the car is paid for, assuming you want to keep it, its going to be 6 or 7 years old and if you drive the national average 90-120k miles. At that point, since you like cars you will probably replace it, if you haven't already. So, like I said IMHO the smarter thing for you to do is lease. You're always going to have a car payment anyways, so may as well do away with the downside risk of repairs when making payments on an old car.

The issue too with longer terms is people do trade out before the term is up, or more importantly, before they have positive equity in the car, and they simply "roll over" negative equity into the next car. Now all off a sudden a few cars down the road this guy's making $500 payments on an 84 month term for a $20,000 car...yikes.

Kense

Exactly why I have leased my previous 2 cars. It's actually cheaper for me to lease. We do own one car that is paid off but I'm leasing my current one. I found myself every 5-6 years in a new car anyways, why? Because the repair costs started to get ridiculous due to the high miles. I would always buy CPO cars with 20-30K on them and by the time it got to year 5 I'd be in the dealership.